Wednesday, December 9, 2015

Don’t Underestimate the Public Sector in Emerging Markets

In this week’s readings, it was clear that one of the key methods for ensuring that companies undergoing international expansion efforts in emerging markets are successful is related to a thorough understanding of public sector dynamics.  Indeed, the article “ Strategies That Fit Emerging Markets” clearly places significant emphasis on the need for companies to have a clear understanding of the political and social systems of emerging markets in which they are pursuing new operations and expansion.

When considered in specifically as related to Lincoln Electric, this need was illustrated in the difficulties that Lincoln Electric faced in China. Because of a lack of understanding related to both the complex system of government agencies, as well as the dynamics that are present within a political system in which the state operates to a significant degree, Lincoln found itself up against a number of obstacles in an unfamiliar market environment that had little to do with the quality of its products of organizational operations. In line with this, perhaps the most glaring mistake made by Lincoln, one that can be seen in a variety of other international business expansions into new territories, is the flawed assumption that the social and political landscape will function in similar ways in different markets.

This assumption could not be further from the truth. For example, the social norms and tendencies of the talent pool in the United States is radically different than those found in the Chinese marketplace. By not understanding how the government and political landscape influences the social structure of a new market, companies run the risk of misapplying methods that, while successful in some markets, are not necessarily the best routes to be pursued in markets subject to starkly different socio-political systems.

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