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Executive Interviews: Interview with William J Holstein on Emerging Markets
February 2008
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By Dr. Nagendra V Chowdary
William J Holstein Award winning Editor, Author and Journalist. He is a Columinst for the New York Times business section. 
How do you describe the slow but
confident burst of growth in emerging
markets? Is this growth here to stay or
do you see this as an irrational
exuberance?
In general, I think it's for real. There
may be some stops and starts because
nothing proceeds upward on a
smooth curve forever. I would expect
volatility in overheated financial
markets and would expect an
increasingly heated battle for
resources and raw materials. Those
pressures could cause growth in
some emerging markets to slow a bit.
But in the long term, I'd expect the
growth trend to continue.
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What are the origins of this new
found growth avenue? What are the
common factors that you think have
been majorly responsible for
emerging markets' growth story?
I think there has been an important
psychological and cultural shift.
Many players in these markets, in
government, in media and in
business, now believe they are
capable of growth and are putting
policies in place to achieve growth.
They are also being assisted by a
massive influx of know how and
investment from Western
multinationals. Their presence cuts
both ways, of course the
multinationals want to make money
and are competing against
indigenous companies, but at the
same time, they are offering valuable
inputs. -
Many MNCs are already present
in one or more emerging markets.
However, not every company from
the same emerging economy reports a
success story. Why is it that some
companies are able to be successful
while many others arenot?
There are somany factors that go into
a company's success or lack of success. I think it boils down to the
basics—do they understand what the
local market wants? Are they willing
to design new products or change
their existing products to meet those
demands? And in general, how
sophisticated are they in navigating
their way through cultural, political
and governmental minefields? -
Do you think First Mover
Advantage would give foreign
companies a wider wedge in
emergingmarkets?
Yes, they often have First Mover
Advantage. But in today's
environment, that's not always
enough. The ability to disrupt the old
order is stronger today than it's ever
been. An emerging market company
can innovate on the basis of price or a
new technology, or take advantage of
superior cultural understanding. -
What do you think would be the
critical success factors for operating in
emerging markets? What kind of
homework do you think that the
companies should do before
embarking on emerging markets'
journey?
One critical factor is getting the right
mix of people. Any company,
whether from the developed or
emerging world, needs to have strong
local savvy in each market where it
operates, combined with high levels
of discipline, teamwork and
creativity. The center, meaning
headquarters, cannot really chart the
most successful strategies in faraway
markets. -
What do you think are the perils
of doing business in emerging
markets? Especially in BRIMC (Brazil,
Russia, India, Mexico and China)
countries?
There are many perils, but the most
common one is investing in a market
strategy even if it does not have a
chance of succeeding. It's very hard
to make the decision to shut down an
operation or refocus a business after it
has been in existence for several
years, and local managers always
have a vested interest in it. -
Why do you think "The China
Factor" evokes such an interest across
the globe? How significant is it for the
global economy and global
corporations?
It is pretty incredible. I've been
covering China's emergence since my
trip to southern China in 1979. A
nation of 1.3 billion people, or a fifth
of mankind, are completely
transforming their economic system
and society! They've had many years
of 9 and 10% growth. The world has
never witnessed a spectacle quite on
this scale. -
One of the big problems of doing
business in China is their track record
on Intellectual Property Rights (IPRs).
To quote one of your articles, "more
companies are realizing that they have
not done the best possible job in
setting up their Chinese operations to
guard against theft." What care needs
to be taken in understanding the
background of Chinese partners or
licensees, and the employees?
Foreign companies need to conduct
due diligence to understand who
their Chinese partners are and they
need tomake it clearwhat the terms of
engagement are. The best advice is to
spell out everything, even if it seems
obvious, because things that are
common sense to Westerners are
sometimes completely alien to
Chinese. Lastly, foreign
multinationals need to maintain their
presence on the ground in China to
see how their IP is being used. It's a
mistake to simply transfer technology
and come back five years later. That's
a recipe for trouble. -
What specific steps do you
suggest for the foreign companies to
protect their IPRs in China?
Aside from the ones I just mentioned,
the best advice is to use the Chinese
system to crack down on Chinese
entities that rip off your IP. The courts
can be effective if a foreign company
understands how to work with them. Are there any best practice that
your research has observed in so far
as MNCs managing their IPRs in
China?
One best practice is to put
technologies in China that are one
generation or two generations old.
That's what Intel is doing with its
$2.5 bn semiconductor investment in
northern China. That way, if the
technology does get ripped off and
copied, the multinational may lose
some sales in China, but the chances
that the Chinese copycat can go into
world markets is dramatically
reduced. Their products are behind
the curve.
1.
Emerging market Case Study
2. ICMR
Case Collection
3.
Case Study Volumes
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