Why do we fail

22 12 2006

No one likes to fail.

We can feel foolish, outmaneuvered, incompetent, insecure, unlucky, silly, angry, overwhelmed, frustrated and in some cases afraid to try again. after suffering a defeat.

Failure is an integral part of the learning process.

Failure is required in order to become successful.

Rare is the successful individual, product or organization that has not met adversity, failure, defeat and loss.

One of the keys to success is the ability to accept failure, learn from the experience and try again.

The fear of failure is so great in some organizations that it freezes innovation, thwarts change and stifles growth.

Organizations try to reduce or limit failure by passing on historically successful methods and accumulated knowledge to new members.

Many times this information is not useful and out of date because the elements, players and dynamics of today’s challenges are quite different from those of the past.

Use the following list to analyze your current projects (and possibly prevent or limit failure), or use the list after a setback or defeat to identify where you can improve.

Reasons for business failure can be broken into 4 main groups:

Planning

  • No plan
  • Incomplete plan
  • Wrong calculations
  • Poor or incomplete interpretation of data and research
  • Failure to take into account all factors
  • Lack of experience
  • Failure to evaluate competitor reactions correctly
  • Failure to anticipate consumer response
  • Significant difference between planned and actual costs
  • Poor cash flow calculations
  • Unrealistic goals and expected outcomes
  • Underestimate risks

Information

  • Didn’t collect all the pertinent information for planning
  • Product or service was not wanted or needed by customer
  • Lack of knowledge of market
  • Lack of knowledge of customers
  • Lack of experience in the industry
  • Lack of experience in manufacturing
  • Lack of experience in sales and marketing
  • Lack of experience in administration

Operations and Follow-through

  • Lazy, didn’t do the work required
  • Undisciplined
  • Unorganized
  • No control of suppliers
  • Did not stop in time and take corrective actions
  • Did not recognize warning signs
  • Ignored warning signs
  • Did not seek professional assistance
  • Lack of attention to logistics details
  • Failure to focus on customers needs, desires and wants
  • Poorly trained personnel
  • Lack of initial capital
  • Not enough capital to maintain operations for first years

Factors outside of our control

  • Important changes in technology
  • Environmental factors
  • International, Federal, State or local government laws, regulations and legislation
  • Aggressive competitor(s)
  • Act of God
  • Change in fashion and trends
  • Theft and fraud

Related Links

Leadership lesson – A Message to Garcia

How to systematically analyze any decision for better decision making

10 things you should never do on a Friday afternoon

9 steps to better decisions





Sourcing and supply chain strategy – Mexico

16 11 2006

Purchasing from Mexico and Mexican suppliers?

Don Gringo at Catemaco News and Commentary brought these items to our attention.

Sourcing in Mexico gets easier.  The article points out that doing business with Mexico is easier than in the past.

  • The proximity of Mexico to the US markets impacts communication, logistics, costs and time factors.
  • Mexico has a history of dealing with the US, and are familiar with competitive manufacturing techniques.
  • Relationships are critical to success.
  • Beware of stereotypes.
  • Take the time to find the “right” partner.
  • Do’s and don’ts for doing business in Mexico

Does your supply chain strategy include Mexico?  It should.  Al Brown president of SupplyMex writes that Mexico offers:

  • Logistics infrastructure, highways, rail and port system that has been improved over the past 10 years.
  • Free trade agreements with 42 countries.
  • Global production and quality standards.
  • Stable political and economic environment.
  • Skilled workforce.

Thanks Don.
Related Links

Purchasing.com

Why you should pay attention to free-trade treaties 

Maquiladoras in Mexico

Industrial and Business Parks in Mexico





Corruption, bribes, mordidas, tips – Doing business in Mexico

7 11 2006

There are perceptions and realities associated with bribery and corruption when doing business in Mexico.

Corruption, bribery, “mordidas” (translated as “bites”, but are actually bribes) and tips are part of Mexico and the foreigner’s perception of Mexico.

It’s a difficult subject to address because it involves ethical and moral decisions for the foreign visitor or business person. What is culturally OK in Mexico, may be seen as immoral and corrupt by an individual from another country.

Historically, corruption in Mexico is blamed upon the Spanish conquistadors. While corruption no doubt existed prior to the Spanish conquest, they certainly did institutionalize it in government and throughout the Mexican (and Latin American) culture.

Today corruption, bribery and tipping occur at all levels of Mexican society and at many different degrees. For one reason or another it has become part of daily life. Most of it involves small sums of money, and is thought of as tipping and not as a bribe.

In fact, to eliminate corruption in Mexico overnight is unrealistic and would probably result in chaos. As some Mexican observers have noted, “La mordida” is the grease that makes the system work.

All of the following might occur in Mexico. Which of the following are acts of corruption or bribery? Which are totally unethical, somewhat unethical, and no big deal? Which of these events occurs in your country ?

  • The garbage collectors come by every 2 weeks, rings the doorbell and ask for money for a soft drink, US $1 or $2.
  • While waiting in a long line, someone comes up to you and asks if you would like to avoid the line and be attended right away. It will cost US $ 5 to US $ 10, and save you 2 hours.
  • Your application for a permit/license has been in the government office for several weeks, and no one seems to be able to tell you what is wrong. The secretary asks if you would like to buy a raffle ticket for some organization. After buying the ticket the application suddenly appears.
  • You visit a local political leader and take him to dinner and a theater event to discuss your project.
  • At holiday time, you send gifts to politicians, suppliers and business associates.
  • Your daughter copies exam answers from another student at school.
  • The police stop you for a traffic violation (which may or may not have occurred). They suggest that for US $ 20 or $ 50 you can make it disappear, and you’ll be on your way in 5 minutes.
  • You need government agency approvals for your business project. In order to make sure everything is done correctly, you hire an official in the department as a consultant.
  • You require a zoning change on a piece of land, you invite a government official to participate as an investor in the project, or perhaps give him some shares.
  • Your son or daughter wants to get into a nightclub, the doorman says no. They give him US $ 5 and walk right in.
  • A city inspector finds code violations in your restaurant. A call to a family member, who knows someone, who knows someone, results in the violations being revoked.
  • A drug enforcement agent receives a phone call that tells him to choose between accepting USD $ 20,000 payment this year to let a drug shipment go by unharmed or to have his children shot.
  • Your immigration papers are not quite right. There is a document missing. You are able to convince the official (though words and tears) to “overlook” the situation, no money is exchanged.

Can you live and work in Mexico and not pay bribes? Yes. (I’m lived and worked in Mexico over the past 14 years and have never paid a “mordida” in my private or business life.)

Are bribes necessary for doing business in Mexico? I think it depends on the circumstances. Most business can be done without them. It depends on you, and your evaluation of the situation. There must be certain areas where influence peddling, and “mordidas” are an integral part of the business, and other areas where it’s not required in the least. This is not unique to Mexico.

All Mexican local, state and federal governments and government agencies are not corrupt. In fact, in the past 10 years there have been great advances in transparency in government, including guarantees for the time involved in processing applications and permissions.

Mexican federal public policy and local and state governments have been actively reducing and eliminating institutionalized corruption and penalizing government workers involved in illegal acts. There is still a long way to go before it’s completely eliminated, but there has been a noticeable change in many areas.

Mexico’s poverty, unequal distribution of wealth, history and culture make it difficult to eradicate corruption overnight. Mexico is a country with many laws, but they are not well enforced. It’s similar to the temptation one might feel on the lonely country road at 3:00 AM and confronting a red light…..do you stop…or run through it?

You should develop and hold firm to your own ethical and moral principals in order to live and do business in Mexico. If you don’t do it at home, why would you do it in Mexico?

Your company should have a clear policy about corruption and bribery, and hold to it when doing business in Mexico, or internationally.

If you have any personal experiences or observations about corruption, bribery, mordidas and doing business in Mexico, please write me or comment here.
Related Links

How to do business in Mexico, Parts 1 – 28

Tipping guidelines for Mexico

Doing Business in Mexico – cultural tips

World Corruption Perception Index – 2006

Patience chaos and doing business in Mexico





Mexico manufacturing, US inventories and safety stock

21 10 2006

Manufacturers are returning to Mexico after “experimenting” in the Asia Pacific region. Some of the big reasons for this return are ; to reduce time to market, eliminate the financial costs of inventories in transit, lower the logistics costs, and to strengthen the supply chain by moving closer to just-in-time deliveries.

But moving to Mexico isn’t going to solve all the problems.

A September 2006 article in CFO magazine points out how US businesses are increasing safety stocks “just in case”. Delayed in the USA The article points out how supply chain disruptions are being provoked by an increasingly saturated US highway system and bottlenecks in deepwater ports and railyards.

The good news is that Mexico is close to the USA, a truckload of goods can leave any point in Mexico and arrive at the US destination in as little as 4-5 days. The railyards and new multimodal Interior Port in Guanajuato, Mexico allow manufacturers to establish production facilities in the interior of the country. Exporters can now clear customs and load the sealed container onto the rail-car at the new (2006) high capacity Customs port located in the geographic center of Mexico.

The bad news is that unless the US begins to upgrade their highway, port and rail facilities, supply chain managers in the US will be buying and storing higher levels of inventory to assure continuity of operations, “just in case”.

Related Links

Delayed in the USA – Supply Chain

Industrial and Business Parks in Mexico

AMPIP Mexican Association of Industrial and Business Parks





The New Mercenaries – Outsourcing

13 10 2006

Mercenary, as defined by the American Heritage Dictionary: Motivated solely by a desire for monetary or material gain. One who serves or works merely for monetary gain; a hireling.”

Using this definition, and forgetting the military connotations of the word (warrior for hire). The term mercenaries can be used to describe outsourcing suppliers and organizations.

Our outsourcing mercenaries are individuals or organizations that are motivated solely by monetary gain and do not share our organizations philosophies, ideals and interests.

We are hiring mercenaries to manufacture our goods, “do the dirty work”, buy time and help us compete better (and win) against the competition.

Are we weighing the long term risks of this outsourcing strategy?

Beyond the current short term cost benefits, have we identified the long-term strategic and control risks to our organizations by embracing outsourcing?

There are inherent dangers and advantages to using mercenaries. What can history tell us of mercenaries and the long term results of depending upon them?

Niccolò Machiavelli in The Prince (a book about the strategy of power and control), wrote that mercenaries were not loyal, dangerous and even useless: “He who holds his State by means of mercenary troops can never be solidly or securely seated. For such troops are disunited, ambitious, insubordinate, treacherous, insolent among friends, cowardly before foes, and without fear of God or faith with man. Whenever they are attacked defeat follows; so that in peace you are plundered by them, in war by your enemies. And this because they have no tie or motive to keep them in the field beyond their paltry pay.”

The decline of the Roman Empire has been linked to the use and dependence upon mercenaries. The failure to control them, and their infiltration into positions of command and control inside the government.

Mercenaries

  • Historically tend to overthrow the power or control they do not like.
  • Adopt strategies to protect themselves from danger and risk.
  • If talented, will seek to increase their power, and if incompetent will ruin their employer.
  • Have no loyalty to the employers ideals, goals or objectives.
  • Are marked by their materialism.
  • Create their own agendas and goals
  • Their first priority is to themselves and self preservation.

Using (outsourcing) mercenaries can be positive when:

  • There is total control and agreement regarding training, quality, standards, and continual improvement.
  • The competition has access to equal or reduced resources in order to hire mercenaries.
  • There are clear short term objectives and goals, at which point the contract is finished and/or renegotiated.
  • There is clear recognition that their intervention is specialized, unique and required to create an advantage for swift campaigns or to solve specific problems.

Mercenaries and outsourcing become a risk or hazard to your organization when:

  • Mercenaries reach a level of importance and power, where their absence will provoke or contribute directly to your failure.
  • They understand your entire process or have access to your “secrets”.
  • When the competition can pay more for their services than you can.
  • Objectives are not clear, and contracts are not specific.
  • Quality standards fall, or the organization accepts below standard levels of work or products.
  • Mercenaries are relied upon to provide long term stability or to reach long term goals for your organization.
  • You forget that mercenaries respond to power and money, and not on providing quality “soldiering”.
  • You believe that by hiring mercenaries you have eliminated risk from your operations.

What risk factors and changes occur in our organization when we relinquish control over the entire process by using outsourcing mercenaries?

What happens when our outsourcing “partner” says no or begins to work for the competion?

Are we outsourcing because everyone else is, or are there fundamental long term strategic and economic reasons that support the decision?

Related Links

The Dangers of Outsourcing and What You Can Do About It

Reining in Outsourcing Risk





What can we learn from the piracy business model

10 10 2006

Here is a interesting way to view, prepare for and compete against businesses copying and pirating your content or products.

Piracy is a business model. Anne Sweeney, co-chair of Disney Media Networks and president of Disney-ABC Television Group, announced during a keynote address at MIPCOM. While her focus was on the pirating of media content, the same message applies for manufactured goods.

“It exists to serve a need in the market….. Pirates compete the same way we do – through quality, price and availability. We don’t like the model but we realize it’s competitive enough to make it a major competitor going forward.

What’s so amazing about this?

Taking the piracy is a business model approach allows us to analyze the business model and how it is acting or reacting to the economic fundamentals in the market.

Instead of locking up our company secrets and seeking punishments for the pirates, we can analyze why and where our “competition” is taking advantage of us in order to strengthen and modify our business model.

None of this changes the actual situation. But it might change business strategies and planning when you realize they are competitors and they are here to stay.

What are the advantages of being a pirate, and the disadvantages?

Why are there opportunities for them? What should I be doing that I’m not?

How can I change my organization to take back the market from the pirates?

Once weaknesses in the piracy business model are identified they can be exploited. When strengths are discovered, they can be integrated into our own business model.

The fight against piracy should begin with a focused analysis of the market environment, existing business models and new strategies on how to adapt to the changing market conditions and exploit them to your advantage.

We can stop focusing on the individual “pirates” and their control or capture, and move toward competing intelligently against them.

Related Links

The easy way

The power of something extra

Netribution – Disney Co-Chair recognizes ‘piracy is a business model’

Boing Boing – Disney exec: Piracy is just a business model

@MIPCOM Piracy is a business model


 





The easy way

9 10 2006

Despite all the attention on the power of marketing in order to create and maintain a successful product and business, there are still many organizations and people who don’t want to, or don’t know how to market their products.

They want others to buy their product because they are less expensive than the competition.

It’s the easiest way to sell, requires no planning, no marketing, no effort on the part of the salespeople or the organization. Quick short term results.

Everyone is in the market with the same goods, all screaming and shouting for the customers attention. The customer finds the seller by accident or luck, and proceeds to bargain and negotiate for the lowest price in the market. Very colorful.

It shows a lack of responsibility, lack of marketing, and lack of imagination on the part of the seller.

The owners say: “We need more profit, cut costs and sell more”.

The sales managers say: “We can sell more, but the product is a commodity, what can we do, cut the costs and we can corner the market”.

Production says: “We’ll cut costs, get cheaper raw materials and tweak the design”.

Buyers tell suppliers: “We can try your raw materials or products and see if the market accepts that price, but you have to give me a better price if you want me to buy more”.

Salespeople tell the sales manager: “I don’t know if I can meet that sales quota, it’s not up to me, it’s up to the market to decide”.

Salespeople tell the customer: “We’re cheaper than the competition, buy now”.

The competition is doing the same thing you are.

The customer faced with similar products and lack of information says: “Give me the one that costs less”.

Where was the marketer during all this?

What should they have been doing and saying to the organization and the customer?

If your product isn’t distinct, different or better than the competition. If you are not educating your customer about the advantages of your products and services. You will never have to the chance to market your products.

You will only be able to offer them for sale.

Related Links

Seth’s Blog: Cheaper

The power of something extra

Sales and marketing terrorism





The power of something extra

5 10 2006

Here is a simple but powerful rule – always give people more that what they expect to get.” – Nelson Boswell

What defines an exceptional leader, a great manager, a super business, or remarkable experience? Something extra.

There are two words (one French and the other Spanish) that convey and represent the concept of something extra, lagniappe and pilon.

Lagniappe (hear it) is the word commonly used in Southern Louisiana and Mississippi. It’s defined by the American Heritage Dictionary as an extra or unexpected gift or benefit.

Pilon is the Spanish word used in the southern US and Mexico to describe a gratuity given by tradesmen to customers settling their accounts, it’s something extra, and not expected.

Incorporating something extra in our actions, results and as a business philosophy can be incredibly powerful.

Something extra:

  • forces creativity and innovation.
  • demands clear understanding what is expected of us by others.
  • focuses our attention of adding value, and not on cutting costs.
  • is positive.
  • is rewarded with good will and positive reactions.
  • will lead to continual improvement.
  • is fundamental to continued success.

Something extra is all about the little things and details.

Something extra is not just something “free”, it must arrive without anticipation, unexpectedly in order for it to be special and make an impact.

Something extra allows you to surprise the customer.

Something extra will make think about your results and expectations. It will make the difference between simple compliance and outstanding results.

Something extra will make you and your results different from all the others.

Embracing something extra and applying it on a daily basis, will make you great.

Giving something extra is not a difficult task. It’s all about applying small acts of innovation and creativity to your results, especially for routine and day-to-day tasks.

The power of something extra can change your life, your products, your processes and how others perceive you.

“If you want to be creative in your company, your career, your life, all it takes is one easy step… the extra one. When you encounter a familiar plan, you just ask one question: What ELSE could we do?” Dale Dauten

Related Links

Motivation – Heroic moments

What defines an exceptional leader





Analyze and Plan using 7 simple questions

3 10 2006

Who – What – When – Where – Why – How – How much

Project management, organizing a team, writing a business plan, creating strategies, planning meetings, running day to day operations, general analysis and problem solving can be facilitated and improved by using a simple application of 7 basic questions.

The application of the standard reporters’ questions of who, what, when, where, how and how much to a specific situation will help organize the process of analysis and planning.

In order for this system to work, all the questions and answers should be written down. You’ll be building a visual map while defining the objectives, tools, resources, bottlenecks, time limits and chronologies of the problem. It will become clear what the real goals are, what is required, what is missing, who should be involved and when the tasks should be accomplished.

Who – Who is or will be affected by the decision or process? Who are the participants? Who will be involved or affected in some way by the project?

What – What are the objectives and desired results? What is the problem or challenge? What are the options available? What tools are required?

When – When is this supposed to happen? Define the deadlines, time limits and chronologies.

Where – Where is it going to happen? The physical place or space should be defined and examined.

Why – Why are we doing this? Why are we doing it this way or by this procedure? Why is it occurring?

How – How are we going to do it? The mechanisms, requirements, and processes needed in order to achieve the goal.

How much – How much is it going to cost?

Example – You are asked to give a speech on the sales results in Mexico for the last quarter for the upcoming Board of Directors meeting on January 10.

Who – The audience is the Board of Directors. The sales department, marketing, logistics and finance departments have the numbers and explanations of the results. Who is responsible for the agenda, audiovisual set up, room reservations? Are any other members of the company required to attend the presentation? You are the project leader and responsible party for the presentation.

What – The presentation is directed at the Board of Directors, they want to hear about results, expectations and strategies of the sales in Mexico. What questions will they ask, what aspects of the business will be of interest or concern? What information is important?

When – The meeting is January 10. You’ll need all the pertinent sales information by what date? It has be polished into a concise presentation by what date?

Where – The meeting will be held where? How big is the room, what equipment will be required for the presentation.

Why – Why do they want to review this information, is there a problem, is it routine? Why me?

How – Will you give a visual media presentation along with documents? What graphics will you show? Will you be the only speaker? Will the presentation style be serious, upbeat, creative or different from other presentations?

How much – Do you have a budget for the presentation and required materials? Do you have to fly in the Mexican sales representative to be present at the meeting? Do you have to rent equipment, hire caterers or provide refreshments or coffee service?

Related Links

How to systematically analyze any situation for better decision making

9 steps to better decisions





20 ideas – how to avoid major problems with your export business

29 09 2006

Exporting is an extremely difficult process as compared to selling in the local or national market. Exporting is not easy, and it’s not inexpensive. It takes planning and requires people that are open, flexible, problem-solvers, and quick at adapting to new situations.

A smart organization that desires to export their products will invest time and money building the proper administrative and sales structure before they begin operations.

20 ideas – how to avoid major problems with your export business

1. Say no to customers. When you can’t do it, say no upfront, before you make an agreement.

2. Create an export strategy before you begin to export. Don’t get sucked into exporting by “accident”.

3. Samples should be equal in quality to the actual production that will be shipped.

4. Make everything perfectly clear with customers. Don’t assume anything, don’t work with suppositions.

5. Learn and understand the business culture of your export market and customers before you begin.

6. Provide detailed price lists and price quotations to the customer. Understand your Incoterms (if you don’t know what these are, stop know and click here)

7. Contemplate what problems might possibly arise (internal and external) that could affect shipment or delivery. Prepare alternatives or take preventive action.

8. Understand that there is a learning curve that affects the organizations ability and performance when exporting to new markets. Calculate the time this will require, and it’s cost.

9. Write down and sign all agreements with the customer (dates, specifications, changes, time, everything). Verify everything with an email or fax if unable to physically sign the agreements and changes.

10. Use caution about exclusivity agreements. Everyone wants exclusivity, will that exclusivity support your entire export production? Will it limit your ability to grow?

11. Develop a quality control system throughout the company.

12. Never send poor quality products, especially in order to meet a shipping deadline.

13. Research the transportation, temperature and climatic conditions that the product will be subject to prior to arrival at the export destination.

14. Create an export price strategy. Know where you are going, and how you want to get there, your costs and required profit margins before you begin to quote prices.

15. Clearly define the costs of production and separate them from the costs of the sales required for exports. Give the sales department a base price to build upon, and make sure they clearly identify the costs related to sales and promotion in the export markets.

16. Always have at least 2 customers in the export market. This will provide protection and stability for your production and for the customers in the export market.

17. Customers who provide the research, development and design for the product may bring samples to you. Assist in the development and manufacture of the samples. Your production know-how (turning ideas into product) is fundamental and important for all involved.

18. Research and investigate fashion, trends and tendencies. In order to survive, you have to create, not pirate and copy.

19. Quality complaints and suggestions must be addressed and implemented immediately. This has to be part of the understanding of every worker, from production to sales to executive suite.

20. Discipline, planning and order. Production planning, raw material purchasing decisions, financing, infrastructure investment, human resources, sales and marketing all must be planned and coordinated, at all times.

Added Oct. 1, 2006 – Bonus legal reminder:  Know the law of the country to which you are exporting concerning:  retention of documents for litigation, product quality and manufacturing and product safety before you begin sales and shipping.  Understand your responsibility and liability for recalls, retrofitting, refunds or destruction of the product.  Learn about your legal responsibility and relationship with brokers, agents and distributors and your products.

Related Links

7 tips for doing business internationally

Maquila and Maquiladoras in Mexico

Why you should pay attention to free trade treaties

Mexico and international free trade treaties





Why you should pay attention to free trade treaties

27 09 2006

Globalization, transnational companies, global sourcing and outsourcing, free trade, do any of these terms sound familiar?

Obtaining products and raw materials for the lowest price possible is a fundamental concept in business. Today organizations are looking for manufacturers and locations worldwide where they can find lower costs of production in order to remain competitive.

Combine the factors of: quality control, low cost production, logistics costs, and the time involved to get the product to market from the factory, and you understand the challenge of doing business and sourcing products in today’s global economy.

To truly determine the final cost of the product, all these factors must be calculated. This will determine which country offers the best competitive advantage. Make sure you are analyzing any existing free trade agreements when you are seeking suppliers globally.

Free trade treaties between countries have a significant impact upon the final cost of goods. These free trade agreements eliminate the tariffs and taxes on imported and exported goods between the countries involved, depending upon their concentration or percentage of “local” or national raw materials (including labor), as specified in the free trade agreement.

Free trade agreements between countries are of great importance and value only if are exclusive and not accepted by all trading countries. The more free trade is embraced by the international community (through treaties or elimination of import and export tariffs) the less impact the current free trade agreements have in determining competitive advantages for a single country.

Here is a simple example of how the NAFTA (North American Free Trade Agreement) free trade treaty between Mexico and the USA, would favor the US supplier over a Chinese supplier.

Example of free trade agreeement competitive advantage:

US supplier to Mexico. If I want to purchase paint made by a US paint manufacturer and have it shipped to my warehouse in Mexico, my total cost to bring the goods to my warehouse in Mexico would be the cost of the paint, plus freight and customs clearing costs. There is no import tariff on this product due to the NAFTA free trade treaty. It would take 4 – 6 days to arrive in my warehouse in Mexico once the product has been shipped from the USA.

US paint $ 20.00 + Freight $ 4.00 + Customs $ 1.00 = $ 25.00 total cost of the US product in my warehouse in Mexico

Chinese supplier to Mexico. If I purchase the same product, from the same transnational company, but it is manufactured in China. Transportation time is 40 days from date product is shipped from China.

Chinese paint $14.00 + Freight $ 8.00 + Customs $ 1.00 + Import tariff (13% of CIF value) $ 2.86 = USD $ 25.86, total cost of the Chinese product in my warehouse in Mexico.

In this example the final cost of the product is $ .86 lower from the US supplier as compared to the Chinese supplier, despite a lower initial product cost. Factor in the financial cost and time required to move the product from the factory to my warehouse, and the lowest final cost in this case would clearly come from purchasing product from the US supplier.

Mexico’s aggressive free trade strategy

Since the 1990’s Mexico has bet heavily on international free trade agreements as a method to improve their competitive advantage and increase their manufacturing base and attract foreign investment.

Mexico has signed 11 existing free trade treaties and 2 complementary economic agreements with 42 countries. It is the only country in the world to have standing free trade agreements with North American and the European community.
The free trade agreements have greatly increased international competition (imports) in Mexico (good for the consumer).

Free trade agreements have allowed Mexican exports to increase and reach destinations and markets that were closed before due to tariffs and costs. There has been increased foreign investment from countries that desired to use Mexico’s free trade competitive advantage for international manufacturing and export projects.

The Mexican manufacturers and suppliers of the national Mexican market were given a “sink or swim” option. Virtually overnight (many of the treaties were phased in over a period of 3 – 10 years), their previous protected market was filled with imported goods (more competition, lower cost, higher quality).

Those that have survived the “invasion”, have had to improve their efficiency, quality and costs. Making them much more competitive in todays global economy.

Britannica’s Definition of free trade:

“Policy in which a government does not discriminate against imports or interfere with exports. A free-trade policy does not necessarily imply that the government abandons all control and taxation of imports and exports, but rather that it refrains from actions specifically designed to hinder international trade, such as tariff barriers, currency restrictions, and import quotas. The theoretical case for free trade is based on Adam Smith’s argument that the division of labour among countries leads to specialization, greater efficiency, and higher aggregate production. The way to foster such a division of labour, Smith believed, is to allow nations to make and sell whatever products can compete successfully in an international market.”

Related Links

Mexico and international free trade agreements





Cultural misunderstanding, it can happen to you.

15 09 2006

When we think of industry leaders in marketing and branding, Disney comes to mind. Geniuses in promoting their brand. Magnificent marketers. Leaders in the theme park industry. Universally recognized brand.

What could possibly go wrong with their expansion into Hong Kong and the Asian-Pacific market? Cultural misunderstanding.

Expansion into international markets and working with other cultures has created unforeseen headaches and problems for Disney once again. Disneyland struggles in Hong Kong

This is not the first time Disney has encountered cultural problems in international projects. EuroDisney also suffered from problems related to culture and customs that were not predicted or not taken seriously.

Disney is not alone. Virtually all organizations seeking to export and participate in international markets face steep learning curves about culture, customs and manners. Mistakes are made, at times very costly mistakes.

The lesson to be learned is to spend the time and money to understand your international markets and the culture where you will be doing business. It’s not enough to understand your brand and current customers. Never underestimate any cultural factor, and never assume that your model, project or way of life will be embraced fully and without reservations.

Related Links

Create great international business relationships

Stereotypes and global business





Putting change into perspective

25 08 2006

We all understand that change is a part of our life. We’re physically changing, our environment is changing, our relationships are changing, the whole universe in changing.

How can we successfully survive and prosper in an environment that is constantly evolving, moving and changing?

How do we reduce and eliminate stress and indecision from our lives?

Change does not have to take us by surprise. It does not, and should not be thought of as a negative force. We can plan, prepare, adjust and create strategies that allow us to feel comfortable, reduce stress and look forward to change.

Change Options

  • Predict the change before it happens
  • Control the changes, limit the velocity or magnitud, guide and channel the change to fit your objectives
  • Create and provoke the changes
  • Embrace the changes, go with the flow, adapt and enjoy
  • Ignore change, the “head in the sand” treatment, pretend it doesn’t exist or isn’t happening.
  • Observe and analyze change, identify the factors that caused the change and study the effects.

Life is all about change. Growth is optional. It all depends on you.





How to negotiate with Mexican business people

25 08 2006

Mexico has a culture that embraces and enjoys negotiations. From the schoolyard to the local markets to the executive boardrooms, negotiations are an important part of everyday life for Mexican citizens.

Mexican business people are good negotiators and enjoy the process.

You can expect tough negotiations if you are doing business in Mexico. Tough negotiations in the sense that they will question everything, and spend a great deal of time trying to get you to accept their point of view or conditions. The arguments may be based on emotions or facts, or both.

You should always come into the negotiation very well prepared. Know what you want, and have the evidence to support your claim. Your arguments, supported by facts, will be heard and processed by your Mexican counterparts. If facts are presented that are new, take the time to verify the information and sources before you reach a conclusion.

Negotiations in Mexico can be compared to the first round of a sporting event, both sides desire to “win”, but rarely do they burst onto the field with all their energy in the first 5 minutes. The process of “feeling out” the opponent, observing their strengths and weaknesses, are critical to understanding how to develop a winning strategy and understanding what you are up against.

Mexicans are often seeking a long term, stable relationship with suppliers and clients. Focus your negotiations and decisions on creating a long term business relationship and strategy with your Mexican counterpart.

Your ability to negotiate will be a reflection of your company, your character, and your abilities as a business person. Take your time, don’t get emotional, support your arguments with facts, and be consistent with your demands or desires over time. The negotiation process is helping to build trust and credibility, it’s important to build solid foundations for your future relationship.

Don’t be in a hurry to end the negotiations. The Mexican culture is more permissive about time and deadlines than you find in USA or Europe. If you are in a rush, you will lose important negotiating power.

Always start your negotiation with some margin and leeway. It will always to be to your advantage to “give” a little before the negotiations are over. It may take 4 hours for you to “give in”, but the gesture will be seen as your willingness to do business and enough for the negotiator to claim a little victory. Everyone wins.

Write down your final agreement, and the results of your negotiations and have both sides sign and retain a copy. This simple step will avoid any language, communication or interpretation problems that may develop in the future.

Related Links

Meeting People in Mexico – kiss, shake hands or hug

Before you go on a business trip to Mexico

How to do business in Mexico, parts 1 – 28

16 Essential Questions – International Business Traveller’s Quiz





How to systematically analyze any situation for better decision making

24 08 2006

The ability to analyze and make decisions is one of the most important qualities of anyone in a leadership and management position.

How to systematically analyze any situation

  • What does the information I have really mean or reflect?
  • What are the questions I should be asking in order to increase my understanding of the situation?
  • Who are the people who have the information and answers to my questions?
  • Ask the questions and accumulate the required information.
  • What are the fears, expectations, limits and points of view of the involved parties?
  • What have I learned, and what am I going to do about it?

Example: Imagine that your salesforce reports that customers are demanding delivery of your products to their store two times a day, at 9:00 AM and 4:00 PM, instead of the current delivery schedule of 3 times a week. What do you do?

Begin the analysis.

What does this mean? The customers needs or desires have changed. Our salesforce has detected a change in the marketplace.

What questions do I need to ask to understand this? Why is the customer requesting the change? Who requested the change, is it driven by costs, lack of inventory space, new management, competitors? What do our people think about this? What customers are requesting the change?

Who are the people with the information and answers to my questions? Your sales-force and logistics department. The CEO, purchasing managers and warehouse managers of our customers. Who is going to contact them and get more exact information about the situation?

Expectations and points of view of those involved? The sales-force knows that without this change they will lose customers and market share. The customer’s executives and purchasing managers have found an method to reduce inventory and stocking costs with your competitor. The warehouse managers are losing personnel and control and are unhappy. There are significant costs associated with implementing and operating the program. Your competitors are aggressively investing in order to take away your market share.

What have I learned and what am I going to do about it? You discover that a competitor is providing deliveries twice a day, and stocking the customers shelves, reducing costs for the customer. They have made significant investments in trucks and personnel in order to provide this service. Your top 20 customers are affected now. Failure to provide equal or improved service will result in the loss of the customers and your market share. It’s time to bring in the company decision-makers and create an appropriate solution and response.

Related Links

Was Peter Drucker right, is it all about attitude?

9 Steps to better decisions





The 6 Fundamental Concepts Behind Every Successful Business

22 08 2006

1. Supply and Demand. The fundamental idea behind business and a market economy. Want to determine where to sell or buy, or predict if prices will be going up or down? Understand the concept of supply and demand.

2. Cause and Effect. Physics applied to the business environment. What you do will affect your competitor and the market and vice versa.

3. People like to feel important and special. Learn this and you’ve discovered one of the fundamental qualities of a great salesperson or marketer.

4. Simple clear communication, on-time. Don’t make it technical, keep it easy to understand. Answer all questions when asked, and never forget to call back and follow-up.

5. Get the work done, on time, and with the highest degree of quality possible.

6. Ask lots of questions and get all the answers.





Build your organization, don’t destroy it

14 08 2006

Pragmatic business people know that strategies must be reviewed before, during and after implementation. Difficult questions must be asked and answered throughout the organization. Results analyzed and reviewed in order to identify flaws and errors.

Many times this exercise can push us into seeking and identifying problems instead of solutions. Too much time spent on what can go wrong and not enough focus on what can be created. Gridlock sets in, no solution is good enough, there is always a flaw.

All to often we find ourselves criticizing the work of others and the efforts that did not succeed as expected. We spend time taking things apart to find out what went wrong, and seeking to identify who was responsible for the “failure”. Our days are spent destroying the ideas of others.

Why not focus an equal amount of time on the positive aspects?

What did or will work, and why?

Creation is much more difficult than destruction. Support the creation of ideas and solutions in your organization, make your first analysis focus on the successful or positive aspects.

Ask yourself, “what am I creating today”.





Leadership by default

12 08 2006

I have had the misfortune to have worked in organizations where the leadership, management and decision-making style could be called leadership by default. This is characterized by leaderships and management’s inability to make decisions on-time or to make decisions at all.

Leaders who are consistently unable or unwilling to make decisions can be a dangerous element in the organization. Often they are insecure about their position, or don’t have skills and abilities required to fulfill the obligations of leadership.

The usual excuses are often repeated to cover up and justify the absence of decision making. These would include; we don’t have enough information, the situation is volatile, and that there is too much information available. The excuses are covering up the inability to sort, organize and prioritize data and the inability to identify and recognize opportunities. Grave leadership errors.

By not making a decision on-time, the options become limited, and with more time, factors come into play that eventually corner the organization into a situation where a decision is virtually forced upon them. It is the only remaining option. The decision maker says they are ready to make the decision, everyone reviews it and agrees it is the right decision (as it is the only option remaining), and life goes on. The decision maker feel validated. It’s leadership by default.

If you go to purchase tickets to the theatre for an event that will be presented in 3 months there are plenty of choices, all different. If you purchase tickets on-time you can have your pick of the event, the seat you desire and the date that is just right for you. By waiting until 5 minutes before an event begins your options are extremely limited, perhaps the event you really wanted is gone. You made a decision, and got tickets with both scenarios, but the results (seats and events) are very different.

It is not fair to the shareholders, customers or employees to allow management to consistently stall and postpone decision-making. Efforts should be focused on finding the right people in the organization who are willing to research, evaluate and identify opportunities and make important decisions on-time, every time.

Related Links

Thanks to Lori for the inspiration – Iwan Cray Huber Horstman and Van Ausdal LLC





International business travel, the end of an era?

11 08 2006

Once again the airline industry is about to have their security guidelines changed in order to accomodate new perceived threats by terrorists. The arrest of 24+ people in London involved in plotting terror attacks aboard airplanes is being heralded in the press and blog world as the end of business travel, the end of an era.

It’s true that business travellers will be the most affected group if new security regulations are put in place to limit carry-on luggage, liquids and electronic equipment. International business travellers will surely suffer most, 8 to 14 hour flights beg for a carry on bag crammed with items that may now be eliminated by new regulations.

The thought of making the trip from LA to Hong Kong, without my water bottle, my contact lens solution, saline spray, Ipod and reading material would make me seek an alternative. Perhaps I would pass the opportunity to meet face to face, and try to do the business via telephone, VOIP, or fax, accepting that fact that the outcome wouldn’t be the same. How many others would do the same?

I believe face to face meetings are an essential part of doing business, and more so for international relationships. But there comes a time when the trip itself is so painful and uncomfortable that we do seek alternatives that are easier and more pleasant, or we charge more in order to suffer the inconvenience.

Two thoughts come to mind:

1. How will global business be affected? How many of us will seek an supplier or customer that is closer to home? How will business change if international travel is severely affected? Will business travellers embrace communication technology in order to make things happen as they used to? Will international business travellers request more compensation, raising the cost of doing business?

2. What will the airlines do to adapt and make it safe and comfortable for their business travel customers? Will they provide, contact lens solution, creams, and bottled water for their customers as part of the standard service? How can they turn this gigantic lemon into lemonade?





Sales and marketing terrorism

10 08 2006

The recent media coverage of political terrorism throughout the world has me reflecting on terrorism and extreme sales and marketing tactics in the business world.

Every industry has individuals or organizations that use drastic, pointless, unethical or dangerous economic tactics in order to increase income or market share in the short term. This use of drastic and irresponsible actions can be called sales and marketing terrorism.

The goal of sales and marketing terrorism is to create immediate change, instill panic and chaos, or further the goals of one group who cannot or are not willing to work with the current system of rules, regulations and norms.

Many times the reaction to these isolated incidents will severely impact the industry, market or specific businesses. Reactions can result in increased government legislation, more government or industry intervention, increased costs of doing business, loss of revenue and reduced customer confidence in the organization or industry.

Some examples of “sales and marketing terrorism”:

A competitor who initiates a campaign of extreme discounts or low prices (dumping) in order to eliminate a competitor or increase market share.

A marketing campaign that uses lies and innuendo to reduce the reputation of a competitor or industry segment.

Products of extremely poor quality (below expected consumer beliefs or expectations) substituted for products known for their quality.

Don’t confuse sales and marketing terrorism with innovative ideas and paradigm shifts in how to do business. The difference is that a sales and marketing terrorist has no plan other than disruption.

Sales and marketing terrorism is a short term strategy or single event that has no regard for long term collateral consequences. They believe their actions will be justified because of short term increases in profit or market share. Rarely do they succeed, but often create chaos and disorder in the marketplace that have an impact on the industry and consumers that can last for a long time.