Wednesday, May 2, 2012

Can Companies Effectively Enter Emerging Markets?

I really enjoyed the first article of this week's reading: "Strategies that Fit Emerging Markets." Given the large amount of current news about the countries mentioned in the article (China, Russia, India and Brazil), I thought that this article was particularly pertinent to this class discussion.

As emerging markets grow ever larger, there is the constant threat of viability, particularly, I think, in the political arena. All of the major emerging markets mentioned in the article have large problems with corruption, human rights violations (particularly China), and a lack of sufficient infrastructure. It's a scary place for any multinational company--especially since monetary transactions are now being watched so closely at home thanks to recent financial woes. Companies have little or no chance to try and work with the systems in these countries, especially if they are held accountable at home.

And that's a large part of my question. We've all seen the news about Iran running out of storage space for oil because companies are backing out of buying it, thanks to the US's actions, Putin is stepping down in Russia, thanks to pressure from Russians, and even places like South Korea and Japan, strong economic centers, are beginning to experience issues (aging population, North Korea strife, etc). Countries and companies are dancing a very complicated dance of strategic alliances, and it doesn't always work.

What's a multinational company to do? If, say, Proctor & Gamble wants to expand more, how will they deal with corruption in India? How will they deal with human rights violations and labor issues in China? Will they try and change the infrastructure and government itself? I think not. Yet, as the article mentions at the end, "GE doesn't treat China and India just as markets but also as sources of talent and innovation that can transform its value chain." That's a real way to get involved--help and build the knowledge of the people in the countries, make them valuable, educate them to build your business.

That's a possible option. But I'm still left questioning how much companies can actually do this. I'm thinking that there will be a lot of contention from the governments of emerging nations that multinational companies are encroaching on the country's sovereignty. How do you think companies can avoid this challenge, but still try and build their market in other places? I'm afraid that it's a much larger deal than just making sure you have the human capital--I think it's a lot more about stepping carefully, engaging the right people, and constantly evaluating your progress. I'm still unsure that this is a perfect solution, but since emerging markets can't really be measured by indices, its' up to multinational companies to seek out the information they need to succeed.

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