3 important assumptions to avoid in emerging markets

22/09/2015

Assumptions to Avoid in Emerging Markets

Assumptions to Avoid in Emerging Markets

By failing to prepare, you are preparing to fail – Benjamin Franklin

Assumptions are made on every project, and most are based on past performance of products or services in similar markets. The incredible variety which exists between emerging markets means that one-size-fits-all approaches do not work in these countries.

Getting it wrong can be extremely expensive, in terms of fines, sanctions and reputation. It can also have long term consequences for opportunities, not just in that country, but in the economic region in general. It’s therefore crucial to do your proper research in the three following areas.

1. Don’t be in the dark about the political landscape

Knowing the country’s political landscape will give you valuable clues as to how to proceed. Just look at mature markets across the world and you see the huge differences between their political systems and policies.

The emerging markets are no different, and in many of these countries, the ruling parties have been in power for decades, so the policies may seem outdated when compared to our policies. That doesn’t make them wrong or inefficient.

Ask a Russian national today and they will, behind closed doors, tell you stories that the “KGB” power remains a reality.

Whilst it’s difficult to establish for certain which parts of the former Soviet regimes remain in place today, failing to consider the environment that these establishments created and, for the most part, maintain through fear or rumor, can be costly.

Most of the former Soviet bloc countries still have strict labor codes protecting the employee against the employer in the majority of cases.

This was typically the case under communist regimes. Under the current market conditions, this employee protection is further heightened where the employer is a multinational company, not originating in the current location of dispute.

In order to ensure that both parties are fairly treated, companies would be advised to make sure that they are aware of the labor code, and any restrictions that it may place on their company policies and procedures.

2. Don’t guess at the infrastructure available

There will be assumptions that you make about infrastructure that I can almost guarantee will prove to be wrong. It is usually the things that you don’t even think about in your home country.

When was the last time you thought about whether there is a road to your destination, clean water to drink or phone service and a Wi-Fi signal?

It’s in these very areas that assumptions can be dangerous. I went on a road trip with colleagues in Senegal, in a medium-sized sedan car.

About 30 minutes outside of Dakar, it was obvious we would go no further; the road had been swept away by a rain storm. With potholes now deeper than our tires, the only way to continue would be with Four-Wheel Drive.

The thought of that possibility had never crossed my mind at the rental car company or on the paved streets of the capital.

Remember, a country is more than just its largest cities, and knowing how to deal with that in your strategy will be key.

In our businesses, today we have many systems and processes that need to be implemented to meet regulations. In emerging markets, it may not be possible to implement those systems in part or in their entirety due to local market conditions.

I spent considerable time reviewing which global company systems should be implemented in Ecuador once the company internet speed was improved.

What we had failed to understand from the local testing was that until Ecuador itself upgraded its bandwidth, there was no way that we could improve the speed at the company building.

3. Don’t be culturally ignorant of the region you are visiting

Successful business may require taking calculated risks, but relationships, personal or business, can be irrevocably damaged by a failure to understand the local culture or business etiquette required.

Declining a dish prepared by a member of your host’s family may be seen as rude or ungrateful, and hand gestures acceptable in your home country may be highly offensive in a place you travel to.

You will never get a second chance to make a first impression.

There is definitely no such thing as a stupid question when it comes to the culture of the local market or country you are visiting. Whenever I traveled to a new country for the first time, I followed these simple rules:

a. When conducting in-country visits prior to either setting up a business or committing to business ventures with a local company, I always had a translator with me.

b. Learn the local language. As an expatriate, you are a guest in a foreign country, and should be prepared to at least learn the basics: Hello, Goodbye and Thank you is a minimum.

Locals will be much more willing to help you out if you at least make an effort to communicate in their local language. It might be the difference between eating chicken or dog!

c. Follow any advice the locals give you! There was reason why all my colleagues would only fly north to south, or vice versa, for African country visits.

The east/west routes are not the best when it comes to comfort or convenience, and I almost got arrested in Mali on my first flight east to west for not having the necessary visa. Apparently, the concept of “in transit” passengers doesn’t actually exist there.

To be successful in emerging market countries, you will need to be willing to challenge assumptions, especially if these are made by individuals with no knowledge of the country or industry in question.

Managing the constraints and risks that are prevalent in these countries will be vital to delivering sustainable business ventures in these fast-growing and profitable markets.

You will encounter problems arising from cross cultural misunderstandings. How you deal with these will eventually decide whether your operations in emerging markets will be successful or not.

There are lessons for all when working in emerging markets, and some of the most valuable may be in the local culture.

What areas of emerging markets and local cultures do you need to research to overcome assumptions?

Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Sarah Ross

Author: Sarah Ross

Sarah Ross is a leading consultant in emerging markets. She motivates management and teaches teams to use innovative, creative new approaches to revolutionize how businesses see these new and exciting markets, not just for quick profit but as integral parts of their long term business strategies. Sarah’s accomplished and diverse career covers over 14 years in Compliance, Ethics, Process Improvement and Operational Excellence spanning a variety of industries and over 75 countries.

disqus comments