Q. After reading your book "The New Emerging Market Multinationals", I gained great insight on the dynamics and evolution of smaller firms that strive to enter and compete among the giants in global markets. From the research that I have done, I have found that there are five main challenges that Western multinationals routinely confront in emerging markets. These are as follows:1. Mismatched Resources Leaders often do not allocate the right resources to emerging markets and often need convincing to change resource allocation.2. Talent Western multinationals face a number of challenges getting the right people in the right places. There are simply not enough people who know the local market thoroughly and who understand what it takes to execute strategies in an efficient manner.3. Innovation International products and prices do not always translate into profits in emerging markets, particularly for consumer industries. It becomes difficult for companies to offer a standard global product when consumers have significant differences in income, language, literacy, social diversity, and urbanization. 4. Risk and Stakeholder Management No matter how successful a global organization is at managing risk at home, the task is larger for emerging markets. 5. Early and Long-Term Commitment Western companies' operations in emerging markets can become stuck once they hit their midway point. These businesses see some success but suffer from a lack of commitment to increase investments and build operations or management systems specific to a given market.It is apparent that all of the challenges listed above go hand in hand when trying to create a successful multinational corporation. My question to you is if there was one soul challenge to overcome that you were to choose from, which would you say would be the most important in efforts to break into the global market and maintain a successful corporation, and why?

You raise a great question.  I think that  the role leadership plays and the reporting relationship between the emerging markets and leadership is what is most fundamental in successfully entering and developing an MNC’s business in an emerging market.  This is because by attending to the emerging market’s business needs directly, the leadership is able to sweep away the inevitable short termism as well as the consequences of organizational processes that are a part and parcel of MNCs.

An excellent example of what I am getting at is GE’s healthcare business in the emerging markets.  GE was an early entrant in to China and India when Jack Welch was the CEO of GE.  Notwithstanding its early entry, GE’s healthcare business in these markets remained tiny. The reasons were precisely the first three reasons you mention: mismatched resources, talent, and innovation.  Recognizing that the business was failing to achieve the potential and desired goal, Jeffrey Immelt, by then the CEO of GE, took the radical step of having China and India report directly to him, along with the heads for the US, Western Europe, and so on.

With this one move, he had direct oversight and was able to allocate the resources and talent necessary to these markets, but more importantly support innovation targeted at these markets.  The result was path-breaking products like the MACi, an ultraportable (<1kg), battery opereated, ECG machine priced at US$500, that was capable of doing 500 ECGs on a single charge of its battery at a cost of $1 per ECG, that was developed and brought to market out of India! Compare this to the MAC 5500 that sold for more than US$10,000.  The MACi is capable of providing the same level of accuracy and reliability in its readings as the MAC5500.

The MACi and other breakthrough products like it have come out of China and India and have not only had a big impact on these and other emerging markets, but have had an impact on GE’s sales in the developed world.  Doctors in small towns and in rural areas have acquired these machines seeing an opportunity to scale up their practice.

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