Posts Tagged ‘foreign markets’

As the LBS Global Leadership Summit approaches, I’m blogging about my thoughts on the various topics being discussed (for more info on the Summit, head here: gls.london.edu). I’m particularly interested in hearing Gina Qiao, SVP at Lenovo, and her take on the BRIC countries and companies in the global economy.

Studying at a university in the West and having worked at companies headquartered in the West, I’ve often heard of the challenges of Western companies entering foreign markets. The BRICs – probably due to their size – are talked about the most frequently. Through LBS, I’ve had the opportunity to travel to both India and China and get a better understanding of these markets. No doubt about it, many Western companies struggle adapting their business models to these countries. There’s a long list of companies that have attempted and failed. I recently listened to Global MD of McKinsey, Dominic Barton, talk about the average time for a Western company to become profitable in China: approximately seven years. That’s a sure sign that the BRICs are no easy markets to enter.

But why is that? On the surface, the human race appears so similar: no matter which country you look to, consumerism has taken hold. But if consumers’ desires for goods are universal, why is it so difficult for foreign companies to get right? Can it really be that hard to learn the unique tastes of consumers in BRIC countries? The evidence and experience certainly suggests so.

Now, flip this perspective on its head. What must life be like for the BRIC companies that have expanded into the West? What conversations are their executives having about consumer research and product positions? There’s no shortage of BRIC companies that are attempting to expand into Western companies: Tata, Lenovo, Natura Cosméticos, Haier, to name a few. Surely they must be having the same challenges that Western companies have: I haven’t yet set a Tata car driving around London.

Much has already been written on how BRIC countries can successfully compete in the West. For example, BRIC countries have cheap labour and manufacturing located close to home and can expand into countries similar to their own (that Western countries could not as easily do). But these are just first steps; a dip of their toes in the waters of expansionism. To truly go global, BRIC companies must overcome greater distances and larger cultural differences. Arguably, they have an even tougher job overcoming the prejudice in Western countries about brands from BRIC countries.

Think of your first imaginations of these foreign countries and then imagine what theirs are of ours. Britain is perhaps viewed as a country of period costume wearers, newspaper readers, football hooligans, church going Christians, who eat bangers and mash and complain about the weather. A marketer sitting in Beijing or Sao Paolo could be thinking this – and there is some truth in there. But to take that as the complete truth would be to completely misunderstand Britain. And this is where the challenge is – in understanding a country from a local’s perspective.

Companies in both the West and in the BRIC countries (and everywhere else too) must bridge these cultural divides. They are making efforts to learn. Some are setting up innovation centers in these foreign countries to learn through research and development, others are partnering with, or acquiring, local companies to learn from people already knowledgeable in the local market.

I wonder why it’s taken this long to achieve only this much. Surely in a more globalised world, it should be becoming quicker and easier to understand cultural differences. I believe there must be a better way of overcoming these cultural barriers. Already in a short time, BRIC companies have shown their ability to grow and expand overseas. Perhaps at this speed they will also discover the secret to understanding and delivering on the desires of consumers from all cultures. It may be just a short time until the BRIC companies are setting the standard for how companies (both Western and Eastern) become successful multinational corporations.

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