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Trade Routes: The Hidden Cost of Expatriate Executives

By: Michael Wynne
Posted: October 26, 2006, from the October 2006 issue of GCI Magazine.

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Often handicapped by a lack of fluency in the local language, expatriates tend to rely on the local manager who speaks the best English. This puts local managers into a position where they can slant information to fit personal agendas. Therefore, experienced out-of-country workers learn to develop broader information sources that help them make better decisions early on.

Many U.S. expatriates have never lived in a foreign country. They don’t know how to adapt and maneuver in a foreign environment. Newly arrived, they rarely are aware of the subtleties of local politics, the sources of power and influence, and the quality of the competition, which they tend to underrate.

Underestimating local competition can be a fatal business mistake. Local competitors have learned how to survive in their own environment. They often are capable, agile, aggressive, and not intimidated by large foreign companies with powerful brands. It is a common strategic flaw of major multinational companies to rely mostly on the power of their brands to overwhelm local competition. Powerful brands without appropriate local strategy and support cannot succeed.

Another common corporate mistake is to choose both expatriates and their local successors primarily based on their product knowledge. The fact is that 80% of the challenges they face abroad are people- and market-related.

It takes years, not months, to adapt completely to new cultures and markets. Yet, multinationals continue to send executives abroad on two-year assignments. Just as they learn how to maneuver in the local environment, they return home.