Companies will only achieve sustainable global business growth if they take investment in emerging markets more seriously, plan for the long term and become systematic rather than opportunistic
It sounds like a cliché but it is true: competition in international markets has reached unprecedented levels and will get much fiercer over the coming years. There are four sources of fast-rising competition.
First, multinationals will be further stepping up their efforts in emerging markets to look for growth. This desire is visible in every company I have recently visited.
Second, emerging market multinationals are growing more aggressive than ever. There are hundreds of Chinese, Indian, Brazilian, Turkish, South African, and other companies, going abroad. They do it flexibly, with good value propositions, lower margin objectives, enough cash, immense speed and sometimes questionable compliance. They have access to finance and find emerging markets similar to their home countries. While large Western corporations form committees to debate expansion, some of these companies are already on the ground, executing their expansion plans.
Third, European and US medium-sized firms are going deeper abroad too. Their value propositions are usually very good and so is their speed and flexibility. Many want to export and go global and they are doing so. Fourth, purely local competitors are stronger and stronger in almost every market. Of 400 multinationals that we advise, all report how difficult it is to fight against innovative competitors. Many of our clients are revamping their competitive intelligence in order to track exceptionally fast competitive changes. To succeed in the coming years, multinationals need a very proactive set of strategic and operational initiatives.
NENAD PACEK SPEAKS ABOUT INTERNATIONAL GROWTH FOR COMPANIES
So where will growth come from? Most companies believe that sales and profit growth will largely come from international/emerging markets in the next decade. But at the same time, many executives feel that their companies are currently no fully prepared to take advantage of this huge growth opportunity. Too many multinationals operate in the sphere that I would call “false sense of progress” in emerging markets. They are often growing, but gradually losing market position. They also see a massive increase in competition that is seriously undermining their existing business internationally.
Questions to ask if you really want to grow globally
Every company that is serious about achieving growth internationally should ask themselves the following questions:
- Is our international business built in such a way that it can last?
- Is our set up such that we can outperform competition in each market year after year?
- How resilient are we against rising competition in each market – have we, through our proactive approach to markets, raised barriers to entry for all kinds of competitors?
- Are we locally relevant?
- What gaps would we have to close urgently to create a sustainable business that will last and deliver global earnings for decades to come?
What to do today to build sustainable global business
After conducting several hundred structured and unstructured conversations with global and regional leaders of major multinationals over the past few years, I have collected some wisdom about what companies should do now to build a successful international business that will last, with specific focus on the emerging economies as the fastest growth opportunity. Here is the list, which is not necessarily in order of importance:
- Focus senior executive time
- Invest properly
- Take the long-term view
- Be seen as a local and compete like the locals
Too many international businesses are distant from the markets, overly reliant on local distributors only and running irrelevant marketing campaigns that do not resonate locally. All in all, many companies are still too opportunistic internationally at a time when they should be exceptionally systematic. And opportunistic companies currently see their business gradually eroded by companies that are actually serious about emerging markets.
In addition to the advice provided above, I would also accelerate knowledge and best practice-sharing within your company. Any new initiative in, for example, Colombia, should be known to the heads of Egypt or Malaysia within hours. Intensify market monitoring. Markets are volatile and so do not allow yourself to fall into budget traps or unrealistic forecasts through lack of up-to-date knowledge. Frequent, scientific, granular and per country market research is needed to keep track of changing customer needs and to adjust product portfolios. Innovate so that your product portfolio always matches rapidly changing market needs. Develop the speed and agility of your local competition so that you remain relevant, while slower competitors fall by the wayside.
Nenad Pacek is president, Global Success Advisors and co-CEO, CEEMEA Business Group