International Strategies for Business

Anyone involved in international business knows the importance of maps and spends a lot of time using them

Sometimes a straightforward mapping of one variable to location is all you need to make data pop out and show you your international opportunities clearly

Even more useful business visualizations can result from multi-variate mappings like mapping the potential locations for a distribution center against both IP address density and cost of business space.

Size of bubbles conveys metro market size and color, nationality, via MicroSoft GeoFlow (Image - Curtis Wong, Microsoft)

Suppose you want to simultaneously evaluate metro market size versus cost of complying with local regulations in different national markets

Multi-variate mapping from the previous post now leads into a map genre of high interest for answering business questions

Getting business answers quickly via self-service mapping and on mobile devices is the driver for the recently announced integration partnerships between SAP and ESRI, centered on their HANA and ArcGIS platforms (see here and here), enabling applications like identifying high-risk gas pipes in close proximity to residential buildings in the Netherlands for predictive maintenance.

This SAP-ESRI map aggregates & shows you info about any area you choose among 5M+ points of interest in real-time

With cloud-based back ends, all of the types of of mapping discussed in previous posts

The Tower of Babel, by Pieter Bruegel the Elder

I’m always learning languages, so useful for international business development. Some of my clients have asked me what language learning apps I think are useful, and after putting some thoughts together about a few, I thought I’d share them more widely.

I’ll follow-up in more detail in a later post, but for now here are some to explore

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If you’ve not already seen it, I highly recommend Orville Schell’s recent article on Walmart and China.

This is quite an interesting story about Walmart, but an even more interesting one about China.

THE SURPRISE

Leaving aside the fascinating observations on Walmart’s “green realignment”, the story for me here is that:

(1) The Chinese government seems to be happily outsourcing some of the attainment of its policy objectives to a foreign-owned multinational corporation (one cooperating with NGOs, no less)

(2) Barriers are being tacitly removed, and the foreign MNC is achieving success and making money

(3) Human rights and brand negativity issues for the foreign MNC seem largely avoided – indeed, to an extent, the opposite.

Doing (2) and (3) at the same time is a big win for foreign companies in China. At the same time, outsourcing or amplifying the attainment of certain policy goals outside the intra-polity web of relationships can sometimes be more effective for the Chinese central government than using/enforcing a direct regulatory approach. Read the account of Lee Scott’s “Get Green Religion” meeting to Walmart’s suppliers in Beijing

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One of the great challenges and opportunities in any business is knowing what you’re really selling to whom, but this takes on a special flavor in international contexts where what you’re really selling can be quite different in one country than the next, and not just on the level of products such as sarees versus sea cucumbers.

The recent sagas of foreign retail in India illustrate this, as well as other special characteristics of markets like India, China, and Japan, characterized by many layers of distribution and middle-men, high regulatory requirements, and politics.

As Bijou Kurien, an executive of India’s Reliance Retail was quoted, “The regulatory and non-regulatory pressures in India are the way of life,” he said. “So any person running a business in India has to be able to figure out how to steer their way through all the obstacles that can be in their path.”

This includes realizing that the race may be run several times before it’s over, in a kind of two-steps-forward-one-step-back pattern, and therefore designing ways to get benefit along the way to the finish line as well as after crossing it. We’ll see a story like this develop below.

This sounds like a lot of trouble (and it is), but the prizes are big and worth it. In this case, modern stores make up only 5% of India’s $500 billion retail industry, in a country where the size of the middle class is in the hundreds of millions and growing. High growth opportunity knocks. No wonder companies like Walmart, Ikea, Carrefour, and Tesco want to get in.

Daunting? How much growth are you looking at in Europe or the US next year? Which prospect is more daunting?

I discuss 2 stages of succeeding in these complex-distribution, high-politics markets using the example of multi-brand retail in India.

STAGE 1 – OPENING THE DOOR

Joint ventures are very tricky to manage and can be counted on to give all parties involved constant headaches. It’s difficult to find the right people with the patience, cross-cultural awareness and experience base to make them work. It’s a challenge to avoid becoming the pawn of a local player with strong government backing. When they go awry, the results can be nightmarish.

But they are a “fact of life” in this type of market, especially for entry into new segments, and the point is to do them well, not avoid them.

Joint Ventures and local partnerships:

To this end, there are various joint venture and local partnership angles in this story:

Walmart + Bharti Enterprises = Best Price Modern Wholesale and Bharti Wal-Mart

Tesco + Trent/Star Bazaar

Foreign partner such as Metro or Carrefour + local companies like FlipKart.com, Big Bazaar, Future Group, Aditya Birla, etc.

Picking up money along the way

The foreign partners above of course want to sell direct to customers, but while waiting for regulatory admission to the sector, they’ve worked with their JV partners running wholesale stores which have let them to build up valuable infrastructure and relationships (and, of course, make money). This infrastructure and these relationships are immediately useful and will be even more so later.

The key point here is that those who will succeed didn’t wait until all regulatory barriers fell before moving, but worked to do as much as possible, gained supply-chain partners, gained understanding of local markets, and found ways to make money within the regulatory framework which existed at each step of the way.

Something for everybody

Deal, deals, deals. Players, players players. But who sold what to whom?

As Matthias Williams and Abhijit Neogy note, re the recent effort to allow 51% foreign ownership of multi-brand retail in India, “To appease its opponents, the government insisted foreign retailers source almost a third of their produce from small industries, invest a minimum of $100 million in India and spend half of that on “back end” infrastructure.”

The infrastructure spend was particularly appealing to the government. Fragmented traditional local retail industry hasn’t been able to capitalize required investments in warehousing, transportation and cold-storage infrastructure. As a result up to 35% of Indian fruits and vegetables spoil before they get to market and Indian food prices often rise quickly when there are minor disruptions in the supply or harvest of staple crops, giving rise to double-digit inflation and angry consumers. So the government is buying inflation control and political appeasement.

To typical Western businesses all these conditions are annoying at best and often occasions of deep concern. They want to see the profit “signal”, this stuff is “noise” and risk.

A perspective better suited to this type of market is to take a perverse and quiet joy in the correct “extraneous” conditions becoming attached to a deal — if they are well negotiated, they will deblock the way forward. The correct signal must have these “harmonics”.

So who wins in the deal?

– Small-scale local manufacturing get guaranteed customers and export possibilities as well as domestic distribution

– Recipients of the $100M FDI requirement get investment

– Local governments who get jobs and infrastructure without having to pay for them

– All 3 of these offer opportunities for local political patronage to operate, so many configurations of politicians can also win – perhaps not a bad thing if we want something to happen.

– Finally the central government gets a tool to control inflation and appease angry consumer.

Who didn’t win?

– Existing keepers of small “kirana” (??????) shops perhaps

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