Doing Business in the Philippines
by: Erika Visser - Associate Partner, Hofstede Insights
The Philippines is said to be one of the most dynamic countries in the Pacific. With a population over 100 million people, the country has a growing young population and thus great potential as an emerging market. With a GDP of 313.60 billion US dollars in 2017 and an annual GDP growth rate of 6 percent in 2018 it is one of the fastest growing economies in the world. The Philippines is seen as one of the best Asian business partners due to the ease of using English in business dealings, its strategic location, a high number of skilled Filipinos and overall good governance in the country. In Filipino culture rank and position play an important role. Good mutual connections can help to establish long-term relationships, one of the most important aspects of a family culture. Adequate time to get to know your business partners is needed especially in social settings like sharing a meal or singing Karaoke. Most large businesses are run by Filipino families and their family members and thus nepotism is quite common. As a family oriented-hierarchical society, decision-making is top-down and consensus is needed among main stakeholders before decisions are finalised. In order to be successful, establish strong connections with various levels of people in the organisation. Make sure that a senior Filipino member always meets with someone with the same or higher level, never lower - this will be an insult.
The three most important things for doing business in the Philippines:
- Kinship - always connect with Filipino business partners through a mutual connection to help build rapport and to establish trust
- Once a strong connection is formed, remember you are dealing with a hierarchical society thus show respect to elders and to senior counterparts. Use the correct titles and match rank with rank. Send an equal or higher ranking employee from your firm to meet with or negotiate with your senior Filipino counterpart
- Make use of social interactions to build rapport and to get to know your Filipino business partners. Socialising and sharing meals are important aspects of Filipino culture
What to look for in a good partner:
- Has multiple strong business connections and is able to organise introductions.
- Has the right status to deal with senior business counterparts.
- Is able to deal with indirect and direct communication.
- A strong communicator highly-skilled in dealing with different cultures.
Ensure you have a another third-party contact on the ground that can check the credentials of your potential partner first.
Make business arrangements well in advance (up to one month or more) and confirm a few weeks and days before the meeting as a courtesy. Provide any materials that will be discussed in advance. Punctuality is important, however meetings will most likely start late. If you are meeting with a more senior business counterpart, the start of the meeting can be delayed even more than usual. Meetings always start with small talk as a way to build rapport. Filipinos are non-confrontational due to the concept of ‘pakikisama’ or getting along with everyone.
Filipinos uses eye contact and raising and lowering of their eyebrows to communicate. Raised eyebrows could be a sign of recognition or agreement. An eyebrow flash ‘quickly raising your eyebrows’ is a Filipino greeting. Traditionally an elder’s hand is placed on their forehead as a sign of respect. Standing with your hands on your hips can be interpreted as an aggressive posture. Never beckon with your palm up using your forefinger, rather hold your hand out palm down and do a scooping motion. If Filipinos do not fully understand what you are asking they will open their mouth. Laughter is used to relieve tension or to show embarrassment, it is a good way to relieve tension.
Business Entertainment / Meals
Food is very important in Filipino culture and socialising is always centered around food and entertainment like dancing and singing. The Filipino greeting ‘Kumain ka na ba?’ is a reflection of the food culture and translates as ‘have you eaten’. Light refreshments are usually served at meetings and should not be refused by the guest. Always celebrate business deals with a good meal and the host should always pay for the meal. For dinner you can invite your business counterparts’ wives, however not usually for lunch. Eating celebrations usually ends with singing and dancing, be prepared to participate in some singing!
It is important that business cards reflect your title and position or rank in your company. There is no need for translations due to the common use of English in most big cities in the Philippines. The visitor should always offer their business card first and the process is less formal than in other Asian cultures so you might receive a card in return or not. You Filipino counterpart might write their home number on their business card which is an invitation that you should call.
Due to the humidity and hot weather in the Philippines, casual dress is accepted. Dark trousers with short white sleeves for men without a tie and long-sleeved blouses with a skirt or pantsuits for women. Even though it may seem simplistic, Filipinos are fashion conscious, clean and neat. Wearing shorts or sandals in public is not recommended except at the beach.
Business Meetings and Greetings
Your Filipino male counterparts will be expecting a firm handshake at the first and all subsequent meetings. Foreign males should wait for the Filipino woman to initiate a handshake. On the other hand, it is ok for foreign business women to shake hands with male or female counterparts.
Gift giving as in many Asian cultures are an essential part of Filipino culture. Flowers and food are good options. After you have been invited to dine at your Filipino host’s house, send a thank you card and small gift. During Christmas token gifts are important, for example giving a company calendar or pen to all staff. Usually gifts are not opened in the presence of the giver to avoid embarrassment in case the recipient is not happy with the content.
How to manage people and build trust
Management styles tend to be more paternalistic due to the hierarchical nature of Filipino culture. Never openly criticize your Filipino staff as this will cause a sense of shame or ‘hiya’. Staff should always be treated with respect and at the same time managed with authority with the boss providing specific instructions on what needs to be done. The boss will take care of his or her subordinates’ needs and at the same time expect loyalty.
Even though there is a hierarchy, consensus among the main stakeholders is an important aspect of making decisions. However the final say will come from the most senior person.
The pace of negotiations are very slow compared to Northern Europe or the US and is a formal process that is usually done through making multiple visits to the Philippines. If the negotiating counterpart has a high rank, make sure that he is met with someone of equal or higher rank. Always show respect to senior counterparts. Use gentle and quiet tones to speak when conducting business as it reflects a harmonious environment. Written agreements at every stage of negotiations are useful as it will most likely reflect whether a ‘yes’ means ‘yes’ or if it means ‘no’. Filipinos feel bound by written agreements. Never decline invitations to social events and use these events to help build strong relationships and to establish trust.
Filipinos expect to be recognized and rewarded for their efforts. This has to be done sincerely and preferably in teams.
Be Especially Careful with
Criticizing the Philippines. Filipinos have a great sense of pride when it comes to their country, culture and especially food. Also be careful not to insult your Filipino host by saying anything against their religion. Most Filipinos are Roman Catholics.
Short Case Study - Yes is not the answer
Analysis of misunderstandings in the case of a collaboration between Swiss and Filipinos [source: Master of Advanced Studies in Intercultural Communication (MIC)
Università della Svizzera Italiana]
1) Critical incident
An Italian-Swiss organiser organised an International meeting in the Philippines. The Italian-Swiss team responsible for the organisation collaborated with locals from Manila. Some logistical aspects had to be discussed and each each party left the meeting with a task to follow up on. During the meeting the Filipino counterparts were kind and answered ‘yes’ to all questions smiling all the time. The following day the Italian-Swiss team waited for the Filipino staff but they had not prepared their part of the work. The Italian-Swiss team was confused as to why they would answer ‘yes’ and then not deliver the tasks as discussed. They then discussed these tasks again the Filipino team and requested for the tasks to be completed by the afternoon. Again the Filipino team did not prepared what was agreed upon.
2) Interpretation of the incident
During this meeting there was tension between the Italian-Swiss organiser and their Filipino counterparts. For the Italian-Swiss organiser it was logical to receive the work that was requested from their Filipino counterparts, however it was not logical for them. The Italian-Swiss team found the Filipino staff to be highly unprofessional and at the same time the Filipino team found their foreign counterparts to be very anxious. It was interesting to understand that ‘yes’ was a certain type of answer (as for ok), but it did not mean ‘ok I will do it’ and ‘I will do it now’ or ‘I have it’. Another problem was that the Filipino counterparts took their time and were never on time. Thus the structure and timing of meetings had to be changed. Fewer meetings during the day with longer breaks. Taking a long break sometimes was an occasion to solve a problem to discuss an idea or to find a solution.
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