Through our consultancy service we have helped hundreds of western companies enter and grow their business successfully in some key emerging markets around the world. About three-quarters of our clients come to us at a very early stage and ask for strategic and practical solutions; the others tend to come to us having tried to develop a business in say, India or Brazil, but have found the going incredibly tough and expensive.
So what is it that people get wrong when trying to grow a business in these difficult emerging market spaces? My experience would say it’s down to the following 5 reasons:
Lack of good preparation – many organisations will enter a country such as India on the back of an opportunistic meeting. They meet somebody at a trade show, they are approached via the internet and the opportunity seems too good to turn down. Of course, you could get lucky and the first person you talk to turns out to be the ideal partner – but this is rarely the case. In depth, quality research into the market is essential. Yes, it costs money and yes, it may slow you down in the very early stages but without the right detailed information and strategic advice at the outset your medium and long term growth will undoubtedly suffer.
Building a business on the wrong cost base – mistakes fall into 2 basic categories. People either assume that, as it’s an emerging market everything will be incredibly cheap or they accept that if things are 25% lower than at home things should be OK. Either way, your business just isn’t going to work – you won’t be able to attract the right calibre of people on the one hand, and on the other you are building a much more expensive infrastructure than your local competitors.
Do some bench-marking. Make sure your cost base is spot on from day one. Believe me, it is really difficult to recalibrate if you get it wrong at the outset.
Poor choice of partners and employees – and by this I don’t mean that people are duped by charlatans and crooks (although this can happen in any country in the world). It’s more that people go into a new territory and don’t really know what ‘good’ looks like in that country. What makes a good salesman in the US may not be the attributes you need from a sales guy in China. The skill-sets of a distributor in India may be totally different from those of a channel to market in the UK.
All too often people are attracted to contacts in emerging markets because they are a good fit with our folks at base – but does that make them a good fit in the local emerging market-place?
Unrealistic time-frame expectations – all of the emerging markets are massively relationship oriented. People don’t want to do business with you until they are sure you are the type of people they would feel comfortable doing business with in the long run (in fact I’d be wary of people who want to jump into bed with you straight away). Relationship orientation, unfamiliarity with the landscape and the inevitable red-tape you will encounter just mean that things will take longer than you may have expected. Build this into your business modelling or you’ll be frustrated and come under increasing scrutiny from the doubters in the team.
Cultural Knowledge and Understanding – often cited as a soft issue, the cultural aspects of doing business in a totally alien environment could actually make or break the project. Do you understand the cultural drivers and expectations of the people you will be doing business with? What are their attitudes to contractual arrangements? What is the decision-making process and who really are the decision makers?
Not learning about the business culture in-country (and that is not just whether they bow or shake hands) is absolutely imperative. There are no aspects of business which are unaffected by cultural drivers. It’s just a fact.
Building a presence in difficult emerging markets - you probably can’t do this on your own. You need people to work with you and guide you through the difficult waters you will encounter. If you do the right research, build an appropriate cost base, chose the right people, set out with realistic time-frame expectations and understand the local culture you have every chance of success. Ignore these issues and it could cost you big time – the case studies are there to prove the point!