The pitfalls to avoid in emerging markets
Today, more and more companies choose to expand into emerging markets. There, they find many opportunities to boost their growth and escape from the saturated Triad markets. Nevertheless, penetration of these markets is not enough to ensure a stable and durable performance there.
Here are the five most common mistakes of international firms, often leading to instability and failures:
1. Managerial practices not adapted to the country
Many companies do not adapt their culture or their daily practices to the local context. This behavior can often be a source of problems. For instance, an open and ‘flat’, Swedish-like management style can hardly work in China, where employees are used to follow rigid roles and precise rules.
2. Do it always ‘like at home’
It is essential to take into account local habits as well as the cultural and social context of every country. The same problem in two subsidiaries can hardly be solved in the same way. A performance bonus, very effective in the US, does not lead to the same results in Brazil, where individualism is far less pronounced.
3. Create an ‘expats’ colony’
It is sometimes useful to put an expert manager, coming from the headquarters, in charge of a foreign subsidiary. Yet, it is critical to always strike a balance and strive to integrate local talents. If not, the company’s image will be tarnished; the idea that management just wants to exploit the local market and does not trust local people can be dangerous.
4. Not encouraging a polycentric management style
Quite widespread, the management style called ‘ethnocentric’ can create many obstacles to the international development of a firm. If top management is just composed of expats, middle managers in the country will soon understand that their career opportunities in the company are scarce. Thus, they will look away.
It is always better to foster a polycentric management style (mixing expats and locals).
5. Only focus on revenues
The firm that does not engage to create a better environment around itself risks a failure. Only focusing on turnover and profits can be rewarding on the short term. On the long term, however, stability and equilibrium are sacrificed.
Source : Harvard Business Review France