Right steps help companies enter new markets

  • 06-Aug-2008 01:30 EDT

Expanding into new areas is a big challenge for companies, one that offers high risk-reward trade-offs. Both risks and rewards are high in emerging markets, according to panelists who provided the Wall Street View on Strategy and Execution during the SAE World Congress.

Expanding into the growing markets in Brazil, Russia, India, and China is a key focus for many companies. These areas represent a potential offset for flat or declining markets in the U.S. and other regions. “Everyone is looking at the BRIC countries. You want to establish a beachhead early so you can grow with the market,” said Lyle Otremba, Vice President, Sales & Engineering at Cooper Standard Automotive.

However, the reasons for doing business in these regions are constantly changing. Some companies have viewed China as a weak market but a great source for inexpensive parts. But that’s changing as workers there earn a bit more and the value of American dollars fades.

“The declining dollar weakens the advantage of component sourcing in China and India,” said M. P. Chugh, Managing Director, Asia Pacific at Valiant International Inc. “We can’t afford to miss the opportunity in China, but we don’t look at it primarily as a low-cost component source.”
When companies make acquisitions to enter new markets, they must pay a lot of attention to the human side to be successful. One of the most important aspects is to find a way to make employees at both companies anxious to make the merger succeed.

“Typically, 75% of acquisitions internationally fail, largely because all the people are not involved in it,” said Timothy Richards, Vice President of Business Development at SKF USA. “You have to have disciplined processes and demand strict adherence to those processes.”

Executives need to remain involved long after the initial deal is completed to ensure that problems don’t arise before the groups are well integrated. “Companies often fail for the same reason as empires, management stray from the plan and things collapse from within,” Otremba said.

Managing groups in different regions is another big challenge. Managers need to balance personnel and expenditures among other tasks. “In China, we throw more people at a project. In North America, we throw more capital at a project. Balancing these two is very critical,” Chugh said.

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