International Business Development Alliance - Your guide to the international business
Tailored solutions forum

Why companies fail in emerging markets: Don't let economic crises interfere with strategy, adjust performance criteria

A Dow Chemical regional executive for Europe, Middle East and Africa says:
 
Our company accepts that there are regular setbacks and crises in emerging markets. We know that most of these crises are largely crises of progress and we do not really adjust our overall strategic approach. We adjust our tactics but we are never really concerned about crises. They come and go and we are here to stay.
 
Economic and political uncertainties can easily disrupt quarterly and even annual plans. This goes with the territory and many companies do not even adjust their cost structure in times of downturn, knowing that this can damage the business once the crisis is over. The wisdom of this approach was clearly demonstrated after the 1998 rouble crisis in Russia. In a Wall Street Journal interview in 2002, Peter Brabeck, CEO of Nestle, said:
 
If I had only thought about short-term profit margins, I would have withdrawn from Russia, like every bodyelse, during the Russian crisis. We did not. It very clearly had an impact on my profit margins, but in 18 months we doubled our market share. This is the difference between short-term profit margin maximisation and long-term, sustainable profitable growth.
 
It is immensely frustrating for regional managers to be criticised for missing quarterly budgets during crises. Performance criteria should be focused on sustainable, medium- to long-term results, not the next month or quarter. Likewise, management incentive schemes should be related to longer-term results.

0 Comments to Why companies fail in emerging markets: Don't let economic crises interfere with strategy, adjust performance criteria:

Comments RSS

Add a Comment

Your Name:
Email Address: (Required)
Website:
Comment:
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment
RSS Follow Become a Fan

Delivered by FeedBurner


Most Popular Posts

Political risk is manageable in Russia
Government and political system in Kazakhstan
Bilateral investment treaties
Why companies fail in the emerging markets: Adapt to the market
Business Transformations in Kazakhstan

Categories

Business intelligence
Business opportunities in Russia
Doing business in emerging markets
For exporters
How to do business in Kazakhstan

Archives

November 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
November 2010
October 2010

powered by