.
Emerging markets have never mattered more to Western multinationals. They have also never been more difficult to navigate. With the global fragmentation of political and economic power, corporations face greater uncertainty and rapidly diversifying sources of risk. Emerging markets are producing formidable new competitors and are also starting to rewrite the global rules of business. At the same time, MNCs’ home governments and established relationships are less useful than they once were when entering new markets. Faced with this complex new reality, multinationals must increasingly look to themselves to solve problems and generate opportunities.
Western multinationals have grown used to a global political order shaped by the United States and its allies. This old order is passing, but a new one has not yet arrived in its place. This speaks to a long-term decline in the West’s influence, willingness and ability to shape global events. At the same time, other players – China, India, Brazil, Turkey and others – are increasingly vocal in their desire to reform global institutions and norms. Other regions, from the Ukraine to the Middle East and North Africa, face deep sources of political instability which coalitions of old powers seem unable to address swiftly and effectively.
Economically, it’s a similar story. Globalization is no longer a Western-led phenomenon. It’s being driven by countries and corporations from across Asia, the Middle East and beyond. These countries are willing to invest in long-term relationships: just look at the staying power of Japanese firms in India. They are also often limited by different rules and operating procedures than Western corporations, gaining an apparent competitive advantage: witness Chinese firms in Africa. Decision-makers in these new economies are also actively reshaping the global rules of trade, aid and global development. The strategic approach of China’s competition regulators is a case in point, as is its ambitious Asian Infrastructure Investment Bank.
What does all this mean for MNCs? First off, companies will face increasingly stiff competition from emerging market firms both abroad and in their own markets. Second, MNCs’ home governments are less willing and less able to provide cover for their companies abroad. They hold less sway than they once did in the face of increasingly assertive, capable and demanding governments in some markets (think China, India and Brazil) and faced with political fragmentation and disorder in others (think much of North Africa). Third, old and established relationships don’t cut it anymore. The regulatory frameworks of emerging markets are increasingly complex and less susceptible to ‘string pulling’ than ever before.
How should Western multinationals cope with this new, more complex world? In short, they need to begin by looking to themselves for answers. Multinationals need more sources of reliable information and intelligence than they once did: on politics, economics, the media, and their legal and security environments. Gathering this information means assembling the right teams of employees, advisors and consultants on the ground. It also means investing in a wide range of relevant long-term relationships.
But simply having access to the right information is not enough. Companies must learn to use it. Potentially transformative information is useless if it falls between the siloes of disparate business functions or if business leaders are unable to interpret it. Companies must therefore ask if their organizational and decision-making structures are fit for purpose. Companies should question whether their boards reflect the geographical, cultural and political backgrounds necessary to understand and navigate this more complex world. They should examine whether they have the right advisory councils and whether their strategy departments are capable of analyzing the business implications of political, economic and social shifts. Above all, executives must ask themselves if they really understand the markets that hold the key to the future of their firms.
Solutions must also be more creative. Dealing with these new challenges requires firms to step in and fill leadership vacuums, to create complex coalitions of unlikely interests, and to talk to and listen to people whose voices didn’t seem to matter before. These changes challenge traditional divides between business functions: between government relations and communications, between legal, business development and strategy. Meeting them requires decisive action and real leadership from the top. Companies and leaders capable of rising to this challenge can thrive in this new reality. Those unwilling to adapt will be left behind.
Brad Staples is CEO of APCO Worldwide.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
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A Brave New World for MNCs: Getting Emerging Markets Right
May 19, 2015
Emerging markets have never mattered more to Western multinationals. They have also never been more difficult to navigate. With the global fragmentation of political and economic power, corporations face greater uncertainty and rapidly diversifying sources of risk. Emerging markets are producing formidable new competitors and are also starting to rewrite the global rules of business. At the same time, MNCs’ home governments and established relationships are less useful than they once were when entering new markets. Faced with this complex new reality, multinationals must increasingly look to themselves to solve problems and generate opportunities.
Western multinationals have grown used to a global political order shaped by the United States and its allies. This old order is passing, but a new one has not yet arrived in its place. This speaks to a long-term decline in the West’s influence, willingness and ability to shape global events. At the same time, other players – China, India, Brazil, Turkey and others – are increasingly vocal in their desire to reform global institutions and norms. Other regions, from the Ukraine to the Middle East and North Africa, face deep sources of political instability which coalitions of old powers seem unable to address swiftly and effectively.
Economically, it’s a similar story. Globalization is no longer a Western-led phenomenon. It’s being driven by countries and corporations from across Asia, the Middle East and beyond. These countries are willing to invest in long-term relationships: just look at the staying power of Japanese firms in India. They are also often limited by different rules and operating procedures than Western corporations, gaining an apparent competitive advantage: witness Chinese firms in Africa. Decision-makers in these new economies are also actively reshaping the global rules of trade, aid and global development. The strategic approach of China’s competition regulators is a case in point, as is its ambitious Asian Infrastructure Investment Bank.
What does all this mean for MNCs? First off, companies will face increasingly stiff competition from emerging market firms both abroad and in their own markets. Second, MNCs’ home governments are less willing and less able to provide cover for their companies abroad. They hold less sway than they once did in the face of increasingly assertive, capable and demanding governments in some markets (think China, India and Brazil) and faced with political fragmentation and disorder in others (think much of North Africa). Third, old and established relationships don’t cut it anymore. The regulatory frameworks of emerging markets are increasingly complex and less susceptible to ‘string pulling’ than ever before.
How should Western multinationals cope with this new, more complex world? In short, they need to begin by looking to themselves for answers. Multinationals need more sources of reliable information and intelligence than they once did: on politics, economics, the media, and their legal and security environments. Gathering this information means assembling the right teams of employees, advisors and consultants on the ground. It also means investing in a wide range of relevant long-term relationships.
But simply having access to the right information is not enough. Companies must learn to use it. Potentially transformative information is useless if it falls between the siloes of disparate business functions or if business leaders are unable to interpret it. Companies must therefore ask if their organizational and decision-making structures are fit for purpose. Companies should question whether their boards reflect the geographical, cultural and political backgrounds necessary to understand and navigate this more complex world. They should examine whether they have the right advisory councils and whether their strategy departments are capable of analyzing the business implications of political, economic and social shifts. Above all, executives must ask themselves if they really understand the markets that hold the key to the future of their firms.
Solutions must also be more creative. Dealing with these new challenges requires firms to step in and fill leadership vacuums, to create complex coalitions of unlikely interests, and to talk to and listen to people whose voices didn’t seem to matter before. These changes challenge traditional divides between business functions: between government relations and communications, between legal, business development and strategy. Meeting them requires decisive action and real leadership from the top. Companies and leaders capable of rising to this challenge can thrive in this new reality. Those unwilling to adapt will be left behind.
Brad Staples is CEO of APCO Worldwide.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
