In preparation for class, read the following cultural case, taken from Kelm & Risner 2007. “Brazilians Working with Americans.”
Company: World Ship
Focus: Overnight delivery of packages
Case Objective: Update the policy on sales executives’ activities
Cultural Conflict: Dealing with differences between Brazilian personal style and new corporate policy
Introduction and Synopsis
In this case we see an American perception on how some new changes at World Ship will help it to be more productive. The new policy divides clients into three categories based on the revenues produced. Each group receives different levels of attention. It is interesting to talk to North Americans who have never worked with Brazilians and to see their opinions about this case. Most do not relate to the problem at all. “What is the problem? The clients can still get all the help they need and the sales executives won’t waste their time in all of those unproductive visits.” The problem is that there is a big difference in the definition of “waste of time.” As the North American executive Terry Kahler observes “American companies are focused primarily on logic, primarily focused on productivity, and really trying to maximize their investment in their business. Brazilian companies, on the other hand, are focused a lot more on relationships and how to deal with their customers and suppliers on a one-on-one basis.” This case also shows how Brazilians have responded to the new policies and how they try to get around some of the parts that they feel less comfortable with.
Case: World Ship
In the movies Tom Hanks spent four years on an island in the Pacific Ocean and still delivered his guaranteed package. In this case a policy change at World Ship is not quite as dramatic, but a change in company policy has left some Brazilians wondering if life on an isolated beach wouldn’t be so bad. World Ship has operations all over the globe and a local office in Salvador, Bahia. Clóvis Oliveira has been the branch manager of the Salvador office for the past three years and one of his top sales executives is Nelson Barbosa.
Last year World Ship introduced a new focus called Primary Customer Prioritization (PCP). World Ship prioritizes customers into three categories. For the infrequent and the low revenue customers there are drop-off sites, pamphlets, online descriptions and a host of other services that are available to all customers. These customers do not require any special, specific, or additional contact with sales executives. Those mid-volume customers who generate revenues of between $500 and $5,000 dollars per month require additional assistance and this is provided over the telephone through World Ship customer service representatives (CSR). High-volume customers who generate revenues above $5,000 dollars are classified as PCP1 customers and they receive direct visits from the sales executives of the local World Ship station.
Under the new guidelines, when a potential customer calls a sales executive, the sales executive provides the customer with a phone number where a profile is created. Based on the answers to the profile questions, the new customer is categorized PCP1, PCP2, or PCP3. The new profile system is designed to be advantageous for both the customers and the sales executives. PCP3 customers become aware of the services provided. PCP2 customers, by using the CSRs over the telephone, receive assistance in tracking packages and advice in payment options. These levels of assistance also mean that the sales executives now have more time to attend to the personal needs of the PCP1 clients. The sales executives can be more flexible, have more time at their disposal, develop future projects, and be more focused on the changing needs of the PCP1 customers. For example, before the new policy Nelson Barbosa worked with 200 clients, clients that he visited on a regular basis. Only 60 of those clients are now classified PCP1, but those 60 clients represent more than 80% of his total revenue in sales. The other 140 are now classified PCP2 and receive their services from CSRs over the phone.
So what is the downside? As Clóvis Oliveira explains, “Technically, the new policy is 100% correct. Culturally, it is 100% complicated.” To begin with it was culturally bizarre to tell the 140 clients that Nelson had been visiting, some for over three years, that he could no longer attend to them personally and that instead they would have to call a number to talk to a representative on the phone. Brazilians want to be treated special. The pleasure of doing business is found in the pleasure of dealing with people. “You mean you won’t be able to take care of me any more Nelson? What do you mean you can’t come and see me? We can’t even go out for coffee Nelson? Oh Nelson, what’s going on at World Ship?” A similar problem arises when new potential customers give the sales executives a call. Culturally it makes no sense for someone, who is already talking to Nelson, to be told, “You need to call the central office, build a profile and then they’ll tell you who to talk to.” Every Brazilian on the planet will respond by saying, “But Nelson, what’s going on? I’m already talking to you and now I need to talk to someone else to find out if I can talk to you?” That, however, is the way it is now at World Ship. Without knowing the buying potential, the sales executives cannot make personal visits. To be clear, World Ship is not refusing any customer. They simply have different levels of assistance.
In addition to the restriction of visits to PCP1 customers, the home office also has a new set of guidelines for how often PCP1 customers can be visited. Each kilometer traveled and every visit made needs to be reported. If a sales executive is allowed 10 visits with a certain client and he visits 20 times, he will have to answer to the station manager and the home office. The number of visits is determined by a matrix based on the revenues generated and any increase or decrease in sales. The home office has really been cracking down on how sales executives spend their time. Sales executives need to know the costs of their time as related to visits that do not correlate to sales. A good portion of Clóvis’ time is now dedicated to helping the sales executives understand the actual costs involved with how they spend their time. World Ship may be a global company, but in Brazil this is seen as a very “American” way of doing business.
Lately the Brazilians have been discovering alternate ways of getting around the new policy. It is not their intent to do anything illegal or underhanded, but they want to soften the harshness of the new policy for those old customers who no longer receive personal visits. For example, the station in Salvador has a secretary named Sandra. Of course Sandra’s job is not to be a sales executive. However, the station does receive a number of over-the-counter drop-off packages. Normally these in-station deliveries do not account for more than $2,000 in revenues per month. Since the new policy, however, over-the-counter revenues are up to nearly $30,000. Old clients simply go straight to Sandra. Sandra also seems to be enjoying an increased amount of flowers and chocolates from grateful customers who thank her for tracking their packages.
American Executive Comments
World Ship is a very classic example of a culture clash between Brazilian companies and businesses and American companies and businesses. As I read through the synopsis I discovered that this example fits very much, and is very much in line, with a lot of American companies trying to do business in Brazil. American companies are focused primarily on logic, primarily focused on productivity, and really trying to maximize their investment in their business. Brazilian companies, on the other hand, are focused a lot more on relationships and how to deal with their customers and suppliers on a one-on-one basis. This culture clash sometimes creates problems in business models and sometimes Brazilian people and Brazilian companies will try to find ways to go around the business models, and try to find ways to create a hybrid model that doesn’t necessarily meet the original design of the company. My recommendations for people finding themselves in this situation is to really trust the business model, to really understand when the business model will impact negatively on the financial results. If they do find themselves where the business model doesn’t work in a particular case, then in some cases you may not want to do business in that particular area and you may want to focus specifically on areas which might bring profit, it might bring better results. And when that area is saturated, we’ll call that say, the available market, when that area is saturated then you can refocus your efforts in finding ways of doing business in areas that are not part of that original plan and not part of that available market. When you have success in those areas, it will spread quickly and customers and employees alike will tend to gravitate towards the model. When you have failure it will be big and you will definitely want to change your model at that time.
World Ship was an interesting case and I had personal experience in this because I worked in a financial bank which also had salesmen there which were selling tractors. And we would do the financing side of that. And to see these sales people go out, they made various visits on site to talk to these clients and make sure that they were satisfied so that they could get more business from them and it did take a lot of time. They would go out there for a full day. They would go out there and go to lunch with them. And if they did jeopardize that, then they did jeopardize losing a client as well. So, I can totally understand from the Brazilian side of this where you can’t just put a dollar figure and say that you can only visit a certain number of people because there might be some who actually turn into bigger revenue. There might be some who have friends in other places. It’s who you know in Brazil that’s more important. So to have this secretary do personal business is probably a good idea, but at the same time there has to be an analysis of future business for Brazilians of some different kind of connection with these clients, whether they can do a meeting together with that sales executive. Something that keeps them in touch still because just cutting yourself off from these clients you would definitely lose your business. Also I was thinking about schedules. If you could make some kind of schedule that told the American executives why you were doing this and what clients you wanted to stick more closely to and have a report, then they are probably more likely to allow you to do that. But it sounded like here that they just wanted to have a certain way to get around the rule and do it the way they wanted to. So there was definitely a gap between the American executives and the Brazilian executives there.
Walter T. Atkinson
World Ship was a very interesting case study, mainly because having been in the airline industry for about 35 years, it kind of hit home, especially when it’s dealing with cargo or small packages. It was interesting because my very good friend is vice-president of cargo for the Brazilian carrier down there and we’ve talked about how you deal with a business down in Brazil. But when we started flying down there we had to fly into two different airports, but we were allowed to pick one airport when we got our final authority to fly into there. So we hired some local sales people. Well we thought that we’d hire local sales people to sell out of both airports and we’d truck the product back and forth to each airport. Well, that’s not the case because when I started meeting with the sales people down there, they had their set of customers in their general airport area and they didn’t go over to the other airport. They were not socializing with those individuals. Well, I couldn’t understand this. So by this time I had a lot of experience in international, but I’d never had any experience in this Brazilian concept of working with the customers a little differently, more on a social level. So I went along on several sales calls with the sales people. And they were long sales calls. You’d go in there and you’d have to sit down and you’d have to relax and you never even talked about buisness until the last 2 or 3 minutes of the sales calls. You’d walk in there, the sales person always got a big hug from whoever they were talking to and they’d ask about their families and they’d talk, everything was social. And business was probably about, over here, you know, in our country we’re talking 90% business, 10% social. Over there it’s about 90% social, 10% business. And we just couldn’t change that around. And finally we just had to accept that, you know, that is how we were going to do business down there. And mainly because we were an international air carrier flying into there we probably adapted a little bit quicker, but I still had people that worked for me back at headquarters in Miami that just couldn’t comprehend that. That was just not the way that you did business. Interestingly enough our operation was bought out by a major US package carrier who wanted our whole airline operation and they went into all of the markets we had. We had about 500 people working down there. And they tried to change things to exactly the way that they were doing things in the United States. Well, as of about 6 months ago, everybody who worked down in Latin America for us, that were Latin American nationals of each country, they’ve all resigned because they did not want to do business that way. And most of the customers down there have moved over to those carriers that still operate and give that same courtesy and service that they expect being in their country.
Brazilian Executive Comments
OK, this case is interesting because in Brazil, and I believe in Latin cultures, physical contact it is very important, sitting with your client, talking, and being able to take care of his needs. When you change this, you are going to have strong resistance from those you have been working with and you may lose them to another company. This type of strategy isn’t well received. What you can do to try to change this, for those clients who will have to stop receiving direct visits, is that you can give them a price incentive. People in Brazil are very sensitive to price issues. If you lower the price just a little bit and say, “Look, if you use the phone system things will be cheaper” without a doubt the majority will change. I have no doubt about it. I once had an experience with televisions where we lowered the price on a pay-per-view package by 12 reals. We increased sales from 5,000 to 18,000 all because of 12 reals. So you can see that this case is very similar. If you give him an incentive, he’ll change without any problem at all. The thing is that over time you’ll get them to feel better about talking on the phone instead of speaking with a person directly, and with incentives he’ll adapt.
I’ve had experience as the relations manager at a bank, and doing business with clients is similar in any kind of business. And so I can make good comments about this case. What happens is that business is done between people, talking with people. And naturally from the business perspective we want to give greater attention to clients who provide greater revenues, greater earnings. But that isn’t really how it works. We also have to give attention to clients who don’t produce returns, but who do demand our attention. It really is difficult to resolve this problem, that of giving priority to some because it is important for the company, but personal relationships count a lot in every way. So, what is needed in this case is to try to find some middle ground between the relationship with people, doing business, talking with people, and having some mechanism for making priorities based on this policy. But following a rigid policy, eliminating some people because they don’t produce returns isn’t going to work at all in actual practice, in theory yes, but in practice no. Now in Brazil there is a thing called “dar um jeitinho.” There are rules, but “dá um jeitinho” means to not have to follow the rule. A typical example is this secretary, Sandra if I’m not mistaken, who sells products to clients, to the clients who aren’t well taken care of. And there is a lot of that in Brazil. If you want to make a rule, go ahead and make a rule, but there will always be a way to get around that rule. This is why they make rules, they make parallel rules, which are the Brazilian jeitinhos. And there is no way to avoid this habit that is part of Brazilian culture.
World Ship was enjoying considerable success in Brazil, but not as much as they wanted and so they began to implement some changes to increase productivity, following more of an American model. This perhaps took away from the direct attention that Brazilians are accustomed to because the change caused clients to be reclassified so that they wouldn’t, so that they wouldn’t take up so much time from the salespeople and from the central system that had been set up by the company. So they decided to divide the clients into three categories and some clients had to call, for example, the sales executive to talk to him, “No you have to call this 0-800 number or to the company’s central office. You are going to be reclassified and then maybe I can directly take care of you. Maybe you won’t be able to be taken care of by me.” Probably they didn’t talk to the client so bluntly but I think that is how it came across to the client. I really believe that they could have reduced this stress if the client, soon after the company had received this news, would have had the marketing folks be the first to contact him directly, and it wouldn’t had to have gone through the sales people. OK, and maybe it would have been interesting if they would have done some research to see how many of these clients weren’t able to be taken care of through the internet. Perhaps they could have done collections, payment plans, those sorts of things to increase productivity in the company. Now it is very important to note that Brazilian clients who are no longer being directly taken care of by sales people and who were used to being taken care of that way, they are probably going to want to know why. What they are thinking is that the company is probably no longer enjoying financial health like they were before, or maybe they will want the company to give them some kind of discount. They will want to have some sort of counter offer. If not they’ll think that the company only cares about money and that it doesn’t care about a long-term relationship with them. I think that World Ship really has to make this change because salespeople in Brazil are not used to and are not trained in appropriate time management. On the other hand here in the United States or in American companies they spend a lot of time training their sales force. They know how important this final connection is with the client and they take care of things more efficiently, helping clients in the best way they can. In Brazil sometimes the salespeople don’t get this type of training, which isn’t valued as much. So I think that as the company does this, putting this policy into effect, the salespeople will be able to spend a specific amount of time with the clients and they need to try to educate them so that they can work more efficiently. I believe this is positive.
Discussion Topics and Questions
- What is your opinion of André Medeiro’s observation and recommendation that Brazilians are very sensitive to price and that if World Ship were to lower the price for those clients that are now PCP2 customers they would accept the change more readily?
- What is your opinion of World Ship’s new policy? Do you find yourself sympathizing more with the American perspective or more with the Brazilian perspective? What recommendations would you give if you were advising the local manager Clóvis Oliveira? What would your recommendations be for the sales executive Nelson Barbosa? How would your recommendations change for those in the North American central office?
- Do you agree with Terry Kahler’s recommendation that you trust the business model? What are the ramifications of changing the model versus potentially not doing business in that area?
- Walter T. Atkinson seems to suggest that we are looking at a balance between courtesy and service on one end and efficiency on the other. Does one side exclude the other, or are there ways to maintain both?
- João Worcman observed that it would be helpful to keep data on what percent of the clients who have been assigned to a PCP2 status really have access to and indeed use the internet for shipping packages. What other data would you find useful for analyzing the effectiveness of World Ship’s new policy changes?
- What is your opinion of Senichiro Koshio’s observation that Brazilians bend the rules, break the rules, and make parallel rules. Is the “jeitinho” really so uniquely Brazilian?
- How valid of a concern is Paul Cluff’s when he observes that World Ship may lose future revenues from clients who are currently categorized PCP2 but who could potentially produce greater revenues in the future? How does the World Ship model account for future potential of its clients?
- How does one interpret the increase of over-the-counter sales and the new role that Sandra plays beyond her duties as secretary? What does it suggest in terms of World Ship’s policy and strategy?