The short answer is TRUST- the same thing an international supplier is looking for. A low risk, successful transaction, which hopefully will lead to profit and opportunity for more business in the future. 

Trust is required in any exchange. There is risk involved in trade, that is why there is profit in it. We have developed institutions like banks that oversee the exchange of money, payment providers that hold funds until delivery and governments and legal systems that stand behind contracts to assist our dealings with each other because without them trade would grind to a halt.

 

Throughout history importers and exporters have led the way developing techniques to manage risk.

Examples:

  • Starting with small trades with a buyer or seller before moving to larger trades;
  • Ships averaging cargo losses at sea to share the risk; 
  • Credit and investment;
  • Working with contracts across different countries. Which language prevails? Where do we settle any disputes?
  • Advanced payment terms like Letters of Credit , Confirmed and Unconfirmed Credit, and Documentary Collections (Sighted - documents against payment and Timed - documents against acceptance); and recently
  • Trading platforms with verified listings; and
  • Trading platforms that provide payment holding until shipping or delivery.
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    Today we can communicate with each other so easily online we sometimes forget there are cultural differences that can cause misunderstandings if we do not keep them in mind. A good example to compare different ways of trust and managing risk is PRC and Western countries. In ancient history Chinese merchants and traders were conducting business long before banks could oversee transactions. With so many people they developed their system of building trust over time with business partners and colleagues. Guanxi 关系, literally ‘relationship’ is a mix of interpersonal trust and business or professional trust and it applies both within and between businesses.

     

    Contrast this to the West, where the default position is trust in business. ‘Yes, yes I trust you, let’s get down to business (...after you sign this heavy contract)’. It is a professional and business trust, interpersonal is not so important - at least not at first. David de Cremer expressed the different approach well in this article for Harvard Business Review when he quoted a Chinese executive "In People’s Republic of China you build trust first, once that is achieved, only then you do business" rather than the other way round.

     

    So to sell to Western buyers is easy, right? No. Just because they are in a hurry to trust so they can do business with you doesn’t mean they take unnecessary risks. There is probably the same percentage of unscrupulous people in any culture, everyone is wary. Check back soon for an article on what buyers will look for to check your company . The important point is that they often look closely at a company before they ever make contact with you. (Of course there is no reason you cannot  take the same approach.) You might have tens or hundreds of thousands, even millions, of hits on your website or product platform page but few enquiries - and this may be the reason. A first impression showing you are professional and ready to do business is critical.

     

    What this rush to conduct business often causes is misunderstanding between buyer and supplier. Expectations are not discussed as they should be, but I am sure you have heard these things talked about:

  • ‘That quality is not good enough’ - ‘but you wanted it cheap’.
  • ‘No, that is not what I wanted’ - ‘but this is what you said’.
  • ‘But that has [component/material/ingredient] in it and that is illegal in my country’ - ‘but you didn’t tell me not to use it, I didn't know’.


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    So how do we work together so that both sides win? We manage expectations to help the relationship.

    Generally :

  • Be clear and precise about your products. Don’t assume ‘they will ask if they want to know about that’. Provide good product summaries and any specification data on your website. Details of products are often included in proposals and capital expenditure applications, long before deciding who to purchase from. If your product is in that document or in that file, you have a better chance than thousands of your competitors.
  • If your client wants customised solutions provide a detailed quote,  with the base price and the price for each aspect that requires customisation. (I am referring here to either a simple product or an early quote that has scope for negotiation as Production Specification is finalised.) 
  • The client may not know you can offer higher quality so include options in your quote. If you have been asked for the standard price and you can offer something more (for example with a better alloy, more colours or a different injection molding technique) add a separate line with the additional separate cost for higher quality options. Even if they do not want the listed optional upgrades, they might think ‘I wonder if they could do this other option I have in mind?’.
  • Depending on your product range, with the rise of e-commerce and entry of many different sorts of buyers who may not have your experience or expertise, you may need to take the lead in Production Specification with some clients to manage expectations against realistic costs. We will look into effective Production Specification soon.
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