Winning the Race in Emerging Markets

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The global business landscape has changed radically since the financial crisis of 2008–2009. But a fundamental reality remains: despite their volatility and differing economic fortunes, emerging markets are critical to the growth of global companies. While the pace is slower than it was in the precrisis years, the aggregate GDP of emerging markets is projected to grow around 2 percentage points faster than that of developed economies for the foreseeable future. These markets will account for around 40% of all consumer spending—more than $20 trillion—by 2020.

As many established multinational corporations have learned over the years, however, winning in emerging markets isn’t easy. Business environments can be difficult, bureaucracies can be hard to navigate, and infrastructure is often poor. Yet some MNCs still manage to succeed where many others fail. In some cases, incumbents capture important growth opportunities despite intense competition from savvy domestic players.


Research studied 55 MNCs, representing sectors as diverse as consumer and industrial goods, telecommunications, and health care, that have succeeded in one or more emerging market. In most cases, these companies are at least among the top five in their industrial sectors, both globally and in a specific emerging market or region. It also focused on companies that have a growing, or at least a stable, share of those markets. There are common factors that distinguish winning MNCs:

Much of the success of winning MNCs can be attributed to smart strategies that tailor these success factors to the circumstances of specific emerging markets. These companies approach each market with a deep understanding of local conditions, consumer trends and sentiments, emerging opportunities, and the competitive environment. They carefully think through strategies and execution for each stage of their business engagement in that market. And they are ready to adapt and innovate as necessary.


When entering a new region, winning MNCs tend to begin in a mature market and then expand outward. Depending on the industry, the entry point for northern Africa is often Egypt or Morocco, for example, while many companies enter Nigeria before expanding into neighboring western African markets. In India, many MNCs begin in the subcontinent’s largest cities and then venture into smaller cities and rural areas.


Upon entering a new emerging market, it is essential that a company bring products that are right for local consumers and the local environment—at prices that customers can afford. Many of the most successful MNCs offer both their existing brands and goods and services that are adapted to the needs and preferences of low-income consumers. Many have also found innovative ways to overcome the infrastructure challenges that are common in developing economies, such as limited access to electricity and good roads.


Another common differentiator of winning MNCs is their keen understanding of customers in individual emerging markets—knowledge they use to build their brands. Brand loyalty can be far stronger in emerging markets, where households entering the middle class and the ranks of the affluent are purchasing certain categories of products for the first time, than in mature markets.


Even when companies have the right products, getting them to consumers can be a significant challenge in developing economies that have inadequate transportation infrastructure, especially beyond the major cities. A number of winning MNCs have found creative ways to distribute in rural areas. In many cases, they invest to develop their own distribution networks.


Many of the winning MNCs studied forge strong relationships with local and regional governments and other community stakeholders that prove invaluable to their long-term success. They also align their activities with the sustainable-development goals of local leaders and embed corporate social responsibility into their strategies.


Execution in emerging markets depends heavily on the quality of talent and the local organization. Winning MNCs invest in attracting and developing local talent at all levels. In addition to training, some MNCs offer programs to encourage the personal growth and long-term success of employees.

A good example of effective people management is the logistics company Bolloré, which is making big new investments in African shipping ports. The company employs 25,000 people in 45 countries on the continent and invests heavily in training to support its long-term growth. Bolloré has trained more than 700 people since 2008 at its Pan-African Training Center, the first of its kind in Africa. Another example is General Electric, which partners with the African Leadership Academy to train leaders on the continent, one of the company’s strongest growth regions; GE has also launched an advisory board to consult on the development of technical engineering skills in Africa.

Emerging markets pose special challenges for foreign multinationals. For instance, talent strategies that work at home will probably need extensive tailoring to succeed in the developing world, and an overreliance on fluency in English may impede spotting talent. It’s critical to develop a core of local talent and to embrace and leverage diversity.

In the talent race, a local company that creates genuine opportunities and exhibits the desired cultural conditions will often win out over a Western multinational offering higher pay.

What motivates a Uruguayan software engineer to work for an Indian company in Brazil? If you don’t know, you risk losing the race for talent in emerging markets. These new markets are growing so fast, even established global players aren’t recruiting and retaining enough employees.

How to win this contest?

By applying these strategies, Standard Chartered Bank reduced attrition rates in its China operations by 3% over 2007–2008—while rivals suffered a dramatic increase in attrition.

Attract Talent by Making Compelling Promises

Make promises about your company’s brand, opportunity, and purpose that appeal to employees in developing nations. Example:

TCS Iberoamerica (a unit of Tata Consultancy Services) provides software and technology services to clients in Latin America, Spain, and Portugal, while also contributing to other TCS endeavors worldwide.

The Tata brand stands for technical excellence. So, when expanding into Brazil and Uruguay, TCS Iberoamerica hired local engineers (not salespeople) and sent them to India to observe its core strengths and standards. They returned home energized and eager to recruit their compatriots.

The company also promised opportunity . For instance, it hired local Brazilian and Uruguayan leaders who were admired in the community to head up operations—not Indian expatriates.

Finally, Tata offered an exciting purpose —including making a $2,000 car that would open up the industry to low-income consumers.

Retain Talent by Keeping Your Promises

It’s tempting to overpromise just to get new hires in the door. But failure to deliver on those promises will sour current employees on the company and ultimately hurt its appeal for potential new hires. Keeping your promises is especially crucial in emerging markets where employees can easily move to global or local companies that seem to offer greater overall rewards.

Your company’s culture plays a central role in keeping promises and retaining talent. Example:

At Standard Chartered Bank’s China operation, many new employees are “raw talent”—they have great potential, but lack experience. To back up its promises, the bank pays careful attention to its culture:

With economic activity in emerging markets growing at compounded rates of around 40%—as compared with 2% to 5% in the West and Japan—it’s little wonder that many companies are pegging their prospects for growth to Brazil, Russia, India, and China (BRIC) and, increasingly, other developing nations. Businesses based all over the globe are feverishly competing for people who, often for the first time in their lives, have numerous options and high expectations. Not even companies with established global experience can coast on past success in meeting their staffing needs.

A company’s culture matters in several distinct ways in emerging markets. First, its “story,” or brand promise, has to feel authentic. Second, employees must be rewarded for reasons of merit; a high potential from Brazil or Dubai must believe that the executive suite in China or the United Kingdom is within reach. Third, although employees want to be recognized for individual achievements, they also want to feel a connection with their teams. Finally, the culture has to be truly “talent-centric,” so that people know they’re critical to the company’s success.

Attracting Talent: Promises Made

How do brand, opportunity, and purpose come together as a promise made at Standard Chartered Bank? The company’s CEO, Peter Sands, explains, “We are serious about being a force for good in the world. It’s not an add-on for us. We are leaders in microfinance, supporting fledgling entrepreneurs in some of the world’s poorest regions. We seek out, as a part of our strategic intent, opportunities to support renewable-energy businesses. By design we are among the world’s most diverse organizations, so top talents from all walks of life are attracted to us because they know they will be embraced as central to our mission, not peripheral.”

Retaining Talent: Promises Kept

Brand, opportunity, and purpose can create compelling promises, but in such a competitive market the temptation is to overpromise just to get people in the door. Failure to deliver will sour current employees on the company and ultimately hurt its appeal for potential employees. That is why keeping promises—important in any market—takes on particular urgency in emerging markets, where employees can quickly and easily move to global competitors or local companies that appear to offer greater overall rewards. Many companies we’ve studied have experienced extraordinarily high attrition rates.

Emerging markets pose some special challenges worth noting. First, beware of exporting your domestic talent strategy to emerging markets. Even if that strategy is highly successful at home, it will probably need extensive tailoring to succeed in the developing world. Second, it’s critical to establish a core of local talent (or of outsiders with a long history in emerging markets) that can guide you in understanding the region. Sending in a talent officer from the corporate center is unlikely to do the trick; despite the pressure to bring people on board quickly, investments in talent take root only with patience. Third, keep in mind that an overreliance on English as the “official language” of the business may prove an impediment to spotting talent. Some of your most promising people may not speak English fluently.

Finally, it’s not easy to embrace and leverage diversity; companies struggle with this in the developed world, too, and very few demonstrate much diversity at the top. In emerging economies, companies have no choice but to nurture local talent, because that’s the pool available and because those bright young recruits want to see others like them in positions of power.


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