CHICAGO – International columnist Michael Muth concludes his Q&A with Bob Okabe, a founder of Prairie Angels in Chicago and a veteran of the RPX Group, by delving into the truth of Japanese diction, a comparison between Chicago and New York in terms of internationalization and how to approach international markets.

Michael Muth: At what stage do you see companies crossing borders to get investment?
Bob Okabe: There are two thresholds: They look when they’re doing business across borders (otherwise the transaction costs are too high) or there is a size limit. Once you can absorb the transaction costs, the fixed costs become a lower percent as costs go up.

MM: How do you recommend for companies to approach international markets?
BO: If you’re selling your product abroad, you need to find distributors and partners. While this might be more expensive to maintain over time, it has a low cost of entry. Your initial risk is less.

While the percent might end up being massive and the transition might be expensive, the risk reduction is often worth the cost. It’s not different in the pharmaceutical market where big companies wait until a technology reaches stage two or three clinical trials and then has to pay extravagant amounts to buy the winners.

It’s cheaper than managing the mistakes. Third-party distribution channels are ways to get into markets. While they may cost more over time, the entry cost is low.

While your costs per customer may be higher at the start than the traditional commission rates, they can be reduced as you build up sales.

While Dell’s final assembly operations are all in the U.S., the company still has a reputation for being price competitive.

All the components are purchased overseas so they’re still cheaper. It also depends on the value of the product (like a high-value automobile). The Japanese used to drive them off the boat. Now they build them in Ohio and Tennessee. When a market gets to a level of maturity, it becomes a hybrid model.

MM: How do you do due diligence on foreign opportunities and partners?
BO: You have to go there. I went to Taipei to meet the manufacturer and distributors. While people talk about a connected world, building relationships is still needed. How many market leaders avoid personal contact? Once you get to know somebody, that can work well for you.

Japan is a tightly bound culture, and while it is tolerant of foreigners, there is still a cultural separation. In rural Japan, you can still hear the phrase “gaijin da,” which translates to “it’s a foreigner”. The expatriate community is much stronger there than many other places because of it.

It’s hard for many native Japanese to “fit” Japanese-Americans in their sense of place. Japanese-Americans who achieve some celebrity level are a case in point.

There is a particular set of native characters for spelling my family name. If I won an Olympic medal or something else that the Japanese press would notice, it’s an even-money bet that they would spell my name phonetically rather than using the traditional characters.

If you’re a foreigner, you’re not quite “real”. I was scolded on a subway train in Tokyo once by an older lady because I was with a Caucasian woman and she thought I was a local.

MM: Do you speak any foreign languages?
BO: I speak “tourist” Japanese. I can get around and ask for directions. This can be very helpful in opening relationships. It shows a respect for the place and culture.

The presumption is that most Americans only know English. Even a limited understanding can be quite helpful. However, to conduct business, you have to have a much stronger command of the language.

If you listen to most native Japanese businessmen, their diction is not clear. As someone of Japanese descent, not only would I need to have a broader vocabulary but I’d need to speak like I wasn’t taught by a woman. I’m dead serious about that.

Their diction is much better. I understood every situation in the movie “Lost in Translation”. It made perfect sense to me (including all the things that to Westerners seem like absurdities). It’s part of business there.

This is not just something that happens in Japan. The same thing happened to me in Beirut. The three languages of choice for business are French, Arabic and English. I understood enough French vocabulary to understand some of the things that were going on in meetings. Even that limited insight was helpful.

As much as I’m welcomed with open arms when addressing someone in their native tongue, I just as often get in trouble when natives start rambling quickly because they assume you can speak their language fluently when you actually can’t.

While Chicagoans accept and receive other cultures, it’s hard to experience them day to day in the business world.

In New York, you can do business with an Indian one day, an Arab the next and a European the following as your regular course of business. That’s less likely in Chicago. It’s not that Chicagoans aren’t receptive, interested or open. They just have less experience. In New York, that experience will hit you in the face.