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How to win a business assignment in Latin America

by: Almiro dos Reis Neto, Associate partner of Hofstede Insights

 

Important

 

The five most important things to know about winning business in Latin America (if you only read one thing that is what you should read):
  1. Latin Americans consider that businesses are done primarily between people and not between companies, so personal relationships are so important.
  2. Overall, the region's Aversion to Uncertainty Index (UAI) is high, so Latin Americans prefer lower-risk businesses, albeit with a lower relative gain. Offer security!
  3. Unlike other regions or countries, Latin Americans do not seek to exclude the emotion of the work environment, especially in family businesses (which are about 80% of the number of companies in the region). Be rational in your business, but understand decisions made on intuition base.
  4. Some conditions of the economy (for example: exchange rate and inflation) are very volatile in Latin America and this makes the local businessmen tend to have a short and medium-term vision, and a lot of flexibility while leading sales (including reading agreements and contracts)
  5. Latin Americans work longer hours (typically between 40 hours and 60 hours per week) than European countries, but do not show a good level of productivity. Do not be surprised if meetings with your business partners are long and unproductive.

 

 

Useful

 

  • In the absence of a methodology for choosing their suppliers, many companies, consciously or unconsciously, choose the following criteria:
  1. Brand, provenance, that is, if it is foreign, it should be good!
  2. Never be the first to use, expect others to test the quality
  3. Indication of a trusted person 
  • Global business subsidiaries and large local business groups conduct price quotations (RFP) with at least three potential pre-registered suppliers, and methodologically analyze the proposals received. However, small and medium-sized enterprises (SMEs) in the region hardly show this kind of discipline to buy products or services. The most common is that they prefer to buy from "reliable" suppliers and negotiate prices and payment terms.
  • The supplier can be considered reliable, with different degrees of intensity, depending on:
  1. Indication of a director or shareholder (Remember that this is a region of high PDI - Power Distance Index, with typically centralized decisions)
  2. Indication of some other reliable supplier
  3. Indication of a trusted person, who may be a parent, child, brother, uncle, relative, acquaintance, friend, employee
  4. Being an old and well-known supplier and therefore already reliable
  • Because contracts often change due to the economic scenario (inflation, exchange rate, new economic laws), many companies prefer to deal with an understandable and flexible supplier to these situations rather than one that has good prices, but does not understand this reality and may sue the company for each contractual change.
  • Price is not necessarily the main factor in decision making
     

 

 

Short case study

 

José Igarra, Director of New Business E-learning Europe, would have a full day ahead: he managed to mark with the Spanish consulate a presentation to 22 potential investors and partners for his business in Brazil. According to the consulate's analysis, all participants are already companies operating in the sector or something similar.
E-learning Europe is one of the largest distance education companies in Spain focused on business training courses and leadership training, and believed that it could have a partner in Brazil that could sell its courses to Latin America, or part of it.

His first surprise was to verify that of the 22 enrolled only 10 attended the event. He had understood that the consulate had confirmed their presence!
At the arrival of the participants, he notice that almost everyone already knew each other. They seemed to be old friends and talked animatedly.
During the presentation, which lasted about 90 minutes, Igarra spoke lively about his courses and how well accepted in Spain. He also spoke about his Research Department, his Content Development area, and his Sales area. He pointed out an estimate of the translation costs, which would be covered by the Brazilian partner, despite the process being conducted entirely in the Spanish HQ, as a matter of quality.

It also made clear the sales targets that the local partner would have, after all the Spanish parent company would have this production.
It opened for questions, but the reactions were few, and really not very important, with questions about "where is the headquarters of the company?", "Is there some clients that already operate in Latin America?"

At the end of the event, he distributed and collected business cards. On the same day, he sent thank-you messages and a new invitation to an individual meeting. Only one executive was interested because he would like to sell local technology support service if the company were to operate in Brazil.
José Igarra then asked himself: with so many euros invested, where did I go wrong?

 

Questions:

 

  1. What did José Igarra do wrong?
  2. Did Igarra attract the interest of potential local partners? Or, is it he just thought of his own interests?
  3. What relationship did Igarra establish with potential partners before discussing business? What did he really know about these potential partners, their current business and their needs?
  4. Even after the event, what was Ibarra's action to establish an effective relationship with potential partners?
  5. What does Igarra seem to understand about Latin America and its culture? Does he, at least, know that in Brazil one does not speak Spanish, but Portuguese?
  6. Igarra was surprised that there were few good questions during the event. In a collectivist culture, like the Latin American, private questions are not discussed in public, only in particular. What could he have done differently?

 

* The case described in this text is fictional. The names of the characters and organizations are merely illustrative. Any resemblance to real facts would have been mere coincidence.