The Background Buzz Insider

March 9, 2011

Forget What You Think You Know (about doing business internationally)

To succeed in emerging markets, toss out old assumptions – and consider packing your bags.

With domestic demand sluggish at best, many are looking to overseas markets for growth, and there is a marked tendency to put on rose-colored glasses when doing so. Who isn't bedazzled by the growth stories being reported from these developing countries? It's not just that many of these countries survived the recession more or less unscathed and are back on growth trajectories that most developed markets can only dream of. According to many predictions, collectively they may soon eclipse today's developed countries.
Many companies also assume that they only need two strategies, one for home and one that lumps the rest of the world into a single "international" group. On paper, having just one international plan seems sensible, particularly from the standpoint of efficiency and clarity. But it oversimplifies. Fast-moving multinationals, figured that out years ago and now spend millions developing, country by country, localized products, packaging, and prices to gain market share in tough countries like India. "We've learned that all of our customers are more different than similar," says Kyle Gendreau, of Samsonite.

Another assumption is that emerging markets have, by now, modernized and globalized. That's only partly true. Consider China. It has been nearly 10 years since it became a member of the World Trade Organization and adopted a host of new laws and agreements that facilitate more foreign investment. Those improvements, while critical, often lull executives from developed countries into a false sense of security, asserts Nandani Lynton, adjunct management professor at China Europe International Business School in Shanghai. One symptom of this tendency, Lynton says, is that executives "are not asking the questions they need to ask to get beyond superficial answers." For example, she says, "an executive will ask, 'Can we buy this land?' and the answer will be, 'The land is no problem.' What might not be mentioned is that you can't get the title deed, or it might hinge on your partner's relationships with government. If you don't keep asking questions, you'll never find out."

The most important ingredient for success, he says, is to "stop looking at emerging markets through the lens of developed markets. That is a recipe for disaster."

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