Analyzing the Cultural Perspectives of Doing Business with Israel
In terms of economic and industrial development, Israel is considered one of the most advanced countries in Southwest Asia. It is the second country in the world after the United States in the number of newly established companies, and it has the greatest representation in the list of NASDAQ companies outside North America. Israel is a world leader in water protection technology and geothermal energy. Its advanced technology in software, telecommunications, and science makes it an analog of Silicon Valley in the United States. Intel and Microsoft companies built their first foreign research centers here; so did other companies – SAP, IBM, Cisco Systems, and Motorola. The support for small and medium businesses is one of the priorities of the current economic policy in many countries. The state encourages businesses to reduce unemployment and provide jobs. In the West, there is an entire support system for small and medium-sized private companies. All developed countries are trying to carry out such forms of support, Israel being one of them.
International relations in Israel may provide a number of advantages to foreign companies. These include the fact that Israel is the only country which has a free trade agreement with the United States, Canada, as well with a number of countries in Eastern Europe and the Far East. It means that Israel is a kind of a business bridge between different regions of the world.
Academic and business sectors of the country are well represented in the world’s largest scientific, technical, and financial centers, as well as in various international programs and projects for the development of innovative technologies, allowing thereby foreign partners a unique access to information and funding.
The equity participation of Israeli companies in foreign high-tech projects can significantly increase the level of competition in co-produced technologies and products. In the area of high technology, agricultural technology, communications, security and others Israel has a significant and yet untapped potential of co-development on global markets of high technology.
At the same time, the Israeli economy is not self-sufficient and is dependent on foreign aid, especially on that from the United States. Israel leads in the total amount of aid received from the United States after World War II (including even Western Europe). American aid forms 4.4% of the Israeli budget.
The first Jewish immigrants brought to Palestine the cultural property adopted in the countries they came from; so the pre-independence Israel dominated the cultural traditions of Central and Eastern Europe. This tendency persisted later as well; it was marked by other Western cultural influences as well (American in particular). Culture and art are actively working on the formation of the Israeli national character, which was built over the centuries as a result of the Jewish living in different civilizations. Music, literature, theater, visual arts, dance, and cinema reflect the cultural heritage of the Jewish people and the world of modern Israel. Now, Israel is the second largest country in the world after the United States in high-tech concentration.
Israel maintains diplomatic relations with 163 countries and has 94 diplomatic missions. Among the closest allies of Israel appear the Unites States, UK, Germany, India, and Turkey.
Now we can highlight the promising areas of business in Israel. They are:
96% of accounting services in Israel are based on the principle of outsourcing, more than 60% are the services in search and recruitment, more than 65% are the services offered by programmers, systems analysts, and web managers – that is, in the area of IT-outsourcing.
IT, Information Security, Mobile
These industries in Israel are not only well developed, but they are also among the most promising ones. In addition to direct business support, public money is being invested in research and development. There is even an effective, tried and tested for many times the so-called scheme of the project called start-up. Normally, it looks like this: a detailed description of the technology of the new idea goes to a venture fund (often public). The inventor signs the contract with the fund about cooperation on the project and gets funding thereafter. When the final product goes to the market and shows to be effective, it is sold with a registered firm right holder and share the proceeds on the sale between the investor and the developer.
Bet on the hi-tech
Modern Israel is one of the world leaders in the area of high technology. Its high-tech sector has gained worldwide recognition. In addition, this area is constantly fueled by foreign investments. This was the case of ICQ in the Tel Aviv company Mirabilis in 1998, which was sold for $ 407 million to the American giant America Online (AOL).
Many technologies, such as the program for the protection of local computer networks, which was originally designed for military purposes, have been successfully delivered to the mass production by the leading Israeli company Check Point Software Technologies and have enjoyed a high demand abroad.
Now, one of the “hot” sectors for investment in Israel is the optics. Israeli companies are working on a wide range of products.
Here there are all kinds of services, from outsourcing to shoe repair services. The demand for such services is huge. In addition to domestic services, highly valued are legal services, such as consulting, analytical services in the Internet (audit and promotion, for example), and advertising services. In the recent years, business connections between the countries of Israel, America, and Europe have increased.
Everything that is associated with food has always been profitable. Since Israel comprises a huge number of different cultures and traditions, there is always a place for restaurant business. Uzbek, Georgian, Italian, French, Russian snack bars, restaurants, cafes, and bistros are among those that are already successfully functioning in Israel.
Because Israel has a lot of history in, but little territory, processing and recycling of waste is extremely urgent. A small firm that offers services such as recycling plastic containers can quickly move in the market.
Such industries as the diamond industry, medical equipment, and tourism also belong in the category of promising business areas to create new companies in.
Financing of new businesses
In Israel, there is an organization in support of small and medium businesses. It offers several schemes, with the loan sizes ranging from 20 thousand to 600 thousand shekels and the rate of 3% to 7.25%. Rates at commercial banks are slightly higher, but they look quite acceptable, even though Israel is not considered a credit paradise: local banks pay about 3% on deposits, lending money to entrepreneurs on 9% interest at 3-4% inflation rate.
The State of Israel has reached a high level of development of science and technology. In addition, Jewish minds successfully develop new weapons. A worldwide known tanks «Merkava», automates “Uzi” and Israeli-made drones. The Israel Army is one of ten best armies in the world, and uses (except aircraft) to 83% of arms and ammunition of its own production. In a hostile environment, weapons should be always in constant readiness for use. In August 2012, the U.S. Congressional Research Service (CRS) issued a report in which Israel called one of the leading suppliers and buyers of weapons in the world. Israel purchases fifth-generation fighters, submarines from Germany, but to see real picture of their sales we have to look at numbers.
In the years of 2004-11, Israel has signed contracts to sell weapons for $ 12.9 billion, putting it in eighth place among the eleven largest arms supplier in the world (after the U.S., Russia, France, Britain, Germany, China and Italy).
Israel and American relationship in defense industry is very important. Israeli military high-tech – they are relatively small companies, creating the most advanced weapons. They require sophisticated technological equipment, some of which is only available in the U.S. This is the basement for cooperation.
Except for the special, extremely rare cases, the Israeli legislation does not impose restrictions on the nationality of the shareholders and the employees of the companies operating in Israel. In fact, all officers, directors, and shareholders can be foreign nationals or residents. Conducting own business in Israel could be done through a variety of legal forms, which are:
4. Commercial agencies
5. Joint ventures
6. Branches and representative offices of foreign companies
7. Non-profit enterprises
All business activities and its organizational and legal forms are regulated by the Israel Law “About Companies” (1999).
It is very promising today to do business in Israel. Economists say the country is a good trading partner with a great potential. It has many important high-tech success stories. Israel is the second after California in developing high-tech technologies. The VoIP-telephony, the Voice mail, Internet Fire Wall, instant messaging etc. were designed and created in Israel.
Israel is also an international leader in the area of agricultural achievements. Very often people do not attach much significance to the importance of national and cultural differences between nations. However, many companies have already started business relations with Israel, for example, the United States.
Israel has a very developed economy. Even without huge natural resources, it has managed to make significant progress in the intensive development of industry and agriculture.
The main share of exports goes to the processed diamonds, high-tech equipment, advanced technologies in agriculture, electronics, security systems, and medical equipment. Israel also exports machinery and equipment, rough and polished diamonds, chemicals, textiles and clothing, agricultural technologies, food, metals etc. It imports commodities, raw materials, military equipment, capital goods, rough diamonds, oil (fuel) etc.
Israelis have different approaches to work, e.g. styles in the organization of meetings, presentations, and negotiations, building client relationships etc. Without understanding these subtleties, difficulties and misunderstandings may emerge, thus resulting in productivity decline. Even the fact that Israelis speak English does not ensure mutual understanding. For example, if an American says “I might do this differently”, meaning “The way it is getting done now is wrong and needs to be changed”, an Israeli might understand: “The way you are doing it is not reasonable, since in what was spoken out there is no mention that there is any problem with the way we are doing it”. And, vice versa, if an Israeli says, “You are wrong”, this might mean “I disagree with your point of view and I want to discuss it more, so that we can reach an agreement on the correct view”. However, an American might understand: “There is no room for discussion. Better back off”. In addition, you have to understand how they see you in order to be successful when doing business with Israelis.
Unlike the American culture, which is monochronic, where one leads and the other one is the subject, the Israeli culture is a polychronic one, focusing primarily on relationships. In a culture like this, feelings and emotions are primary, objective facts are secondary. One has to be sure to take into account the difference in mentalities. In addition, understanding the history and the culture of the country is essential.
The basis for the formation of a business alliance or a partnership is mutually beneficial long-term cooperation. Mutual trust is a prerequisite for forming a business alliance. For doing business in Israel, it is important for America to understand the subtleties of the culture of this country. If you choose a right way in business, you will surely be successful.
Achieving a full integration will not be easy, even for experienced players. The first step would be investing in promising Israeli venture capital funds, and the simplest absorption will be easy to implement. A more difficult challenge would be to achieve the necessary level of research and development and to implement the investment plans. This requires a deep knowledge of the sector, a close contact with the leading local venture capitalists, and the focus on integration.
The integration of innovation products to Israel would enhance the competitiveness of the companies investing. In turn, Israel would also benefit from these trends. The diversification of funding sources and the integration of Israel into the global innovation enterprise network makes Israeli companies and the sector as a whole more stable. Further development, in turn, would allow the government to focus on issues such as tax reforms and deregulation.
The success of any business lies in its business idea, accepted by the market, as well as in professionalism, the desire to profit as much as possible, and, of course, in one’s luck. In conclusion, one should mention that many US businessmen are already prospering in Israel.