塔倫．卡納：當然，有很多很好的例子。例如，有家德國批發商，規模六百億歐元的Metro集團。它最大的事業部是Metro Cash and Carry。可以把它想成小型企業的山姆俱樂部會員店。它賣東西的對象，不是你和我這種個人消費者，而是賣給企業。我已經與他們合作五、六年，協助他們制定計畫，並在亞洲國家執行策略。
Tarun Khanna, Harvard Business School professor, explains how multinationals can thrive in emerging markets.
Sarah Green: Welcome to the Harvard Business Review IdeaCast. I'm Sarah Green. I'm here today with Harvard Business School's Tarun Cana Khanna, co-author of Winning in Emerging Markets: A Road Map for Strategy and Execution. Tarun, thanks so much for being here today.
Tarun Khanna: Thank you, Sarah.
Sarah Green: So let's start with maybe your definition of what an emerging market is. Because there are some competing definitions.
Tarun Khanna: I think we take the term emerging market very seriously. That is, it literally is a market that isn't quite there yet, but is on the way to getting there. That is, it's emerging. What I mean by that is a market at the end of the day. Think of the grocery market. Is a place where you go to buy something. So it must do whatever it needs to do to get the buyer and seller together.
In other words, it must be able to inform you as to where the groceries are. And the sale of the groceries needs to know where the buyers are. So information is an important component. And finally, when you buy the groceries, and you put it in your bag and take it home, you ought to hang on to it and know that you have rights over the groceries that you just bought. You don't want somebody to grab them and run away with it.
And that's essentially what a market is. You need information and property rights. And what we define an emerging market to be, is any situation where either of those two items are underdeveloped. Which turns out to be most of the world. So we have a very structural definition of emerging markets. As opposed to the existing definitions out there, which are correct and descriptive, but a little bit tautological.
In other words, they say an emerging market is one that's poor or fast growing, or things like that. That doesn't really tell you what to do with it, other than noting that yes, it's poor and fast growing. Whereas our definition tells you, here is the structure, here are the things that are problematic, and here's what you do about each of these things.
Sarah Green: And is the structural focus an attempt to sort of solve the problem where you're talking about emerging markets? But that's a term that people use for Brazil, for India, for all these other countries. And those are obviously very different from each other. But they also have very diverse populations within them.
Tarun Khanna: Yes, the idea is to provide a simple way to get a map of a particular location. So our position would be that there are a lot of commonalities between the big emerging markets. The so called BRIC countries, or you add South Africa, Turkey, Indonesia, Mexico, places like that into it. They are all vibrant. That they all have different kinds of issues that put them into the bucket of emerging markets.
There are some commonalities across the class. But of course, as you pointed out, it's very different running a business in San Paulo, from one in Jakarta, or Beijing. And our structural definition allows you to understand what aspects of the structure are common across these places. As well as what's different across them as a class of locations from New York and London.
Sarah Green: Now you've talked in the book about something you call institutional voids. Is that part of your structural definition?
Tarun Khanna: Yes, that's a central construct in some sense. It's a bit of a mouthful. But a void is simply something that's missing, right? And so we say that if a particular thing that you take for granted, say a bank. A bank seems like such a natural thing to think about. You and I can deposit money in the bank with the click of a mouse. Or walk into and talk to a teller. Or we can withdraw money or take a loan, et cetera. That bank is an intermediary between buyers of capital-- people who want to use a capital-- and sellers of capital-- in other words, people who deposit money in the bank.
To keep it very simple. Now that elementary functions of financial intermediation doesn't work in many parts of—to pick an extreme example, the Democratic Republic of Congo. Or even in parts of Nigeria when there is violence all around, or during the Asian financial crisis in the late 1990s when people were drawing money hand over fist, worrying about the solvency of the banks. Or frankly in our own neighborhood, not too long ago, when people are worried about banks failing. So the failure of the banks would be an example of an institutional void in the market for debt capital. So an institutional void is simply an institution that is void or missing.
Sarah Green: And are you saying that different emerging markets may have different voids? And that's something that businesses looking to grow in those markets need to be aware of?
Tarun Khanna: Yes, that's exactly correct. That voids are different in different places. And so it's not helpful to say that a market is emerging. It is a very aggregate description that – in my experience working with companies, and entrepreneurs, and investors, and so on – it doesn't really tell them what to do on Monday morning. Take Korea for example. It's not technically an emerging market by, say, the IFC definition, because it's an OECD country.
But I would say the market for equity capital, until very recently, has been very poorly functioning. On the other hand, its product markets are extremely well functioning. Chile on the other hand, which is an emerging market in Latin America, has the opposite issue. Which is its capital markets look really well, and its product markets and perhaps a bit more deficient. So it really depends. And the point of the structure definition is to get a very clear map before you make any big investment decisions or management decisions.
Sarah Green: Ok, so my second question to you on that issue of intermediaries and voids, is that in the book you have a good metaphor for describing some of the stuff. The way companies tackle these challenges. Which is you talk about the experience of people traveling to those countries. And I was wondering if you could maybe walk through that metaphor a little bit with us, sort of to just hammer this home.
Tarun Khanna: So a simple related example would be if I want to plan a trip across the United States. As a backpacking student, let's say. It's been awhile since I was a backpacking student, but if I that I were a backpacking student. I would simply go on the web I imagine. And to start to get a list of places that I could stay at. Which may be as simple as cheap-o camp grounds, to very high-end hotels, depending on my financial means. And I would perhaps go to a rental car agency, rent a car. I would go to some sort of web-based travel agency and book some tickets.
In other words, I would be relying on all these existing intermediaries. Which by the way, all have competition forcing them to do a good job. And they all have regulation in the background to make sure that they don't abuse their customers. Whereas if I were doing the same thing across rural India, or Sub-Saharan Africa, or the Andes Mountains in Latin America, why they wouldn't be very much web coverage to get me this information. There certainly wouldn't be Avis and Hertz car rental agencies standing by to give me cars at a moment's notice. Even if I had gold plated privileges in those companies.
And there probably wouldn't be too many flights that were reliable. So all of those would be voids that would prevent my journey from happening a smoothie or efficiently as it would happen in the United States. And that would mean that I would need to spend more time on it. I would need to be carrying much more equipment with me. I would need backup plans. And I would just organize my trip very differently.
Sarah Green: So you mentioned that you do work with companies on some of these issues. So can you give us maybe a company example that translates some of what we've talked about into the business side?
Tarun Khanna: Sure, lots of great examples. There is a German wholesaler which is, I want to say, a EUR 60 billion company metro group. Its biggest division is called Metro Cash and Carry. Think of it as Sam's Club for small businesses. So it doesn't sell to you and me, the individual consumer, It sells to businesses. I've been working with them now for five or six years, helping them to craft their plans and with the execution of their strategies across a range of Asian countries.
And what's interesting is that you have to balance the attention between adapting their model of having these stores, and building the supply chains to get the goods and services that they need to their customers. To each of China, India, Japan, Vietnam, Indonesia, and places like that. You want to localize it to adapt to the institutional voids.
But on the other hand, you can't have Metro in each country be completely different. Because then coordinating across the different examples would be exceedingly different from headquarters in Dusseldorf in Germany. And so there's that balance that we constantly strive for. And the map of institutional voids is a very simple anchoring point, so to speak, for beginning that strategy formulation and understanding some of the challenges of executing it.
Sarah Green: So what is the biggest mistake you see companies making when they're trying to get into emerging markets?
extent to which their experience is going to be useful in a new context. And I think that's a very human response. If you're a successful senior executive, or a successful investor in one country, one location or one set of circumstances, chances are that you've gotten some confidence from that process, correctly gotten some confidence from that process. And there is what psychologists call biases of different sorts, I think they're called recency biases. The recency of your experiences leads you to think that that's going to transfer over very well. And you see that all the time.
People assume that the way they motivate employees in one place, is likely to be the way they would motivate people in another. And at a very abstract level, that might be true. For instance, everybody likes to be appreciated. And at the level, of course, it's true in every location. But the way you express that appreciation might be completely different depending on the forms of compensation that are available to you, the extent to which you could use equity linked incentives, versus profit sharing, the union restrictions that might kick in in different places.
And so the closer you get to Monday morning reality, the more you realize that the abstract idea that everybody likes to be appreciated, is going to have to be acted out very differently depending on the institutional circumstances. And I think failing to appreciate upfront that there are these very robust -- and by robust I mean several decades long differences in the context in the most nitty gritty things – is what trips people up.
Sarah Green: Ok, now you're touching on something that we haven't even gotten to, because we've been talking about strategy and execution. But you're talking about the human element too.
Tarun Khanna: Yes, the human element I think is the underpinning of the entire story. That ultimately the institutions that we find ourselves embedded in, are created by human beings. They are the result of a little bit of history. A little bit of regulation. A little bit of serendipity. A little bit of conscious design. A little bit of happenstance and experimentation. A bunch of different stuff that kicks in, and human beings concoct, and circumstance they find themselves in.
Look at what we are going through in our country right now. With Mr. Obama, and health care, and reshaping pension schemes, and worrying about an aging work force. These are all ultimately human interactions that shape the institutions that will be both enables and constraints for our entrepreneurs going forward. And the same is true in in India, South Africa, Brazil, et cetera.
Sarah Green: Something important to remember. Tarun, thanks so much for joining us today.
Tarun Khanna: Thank you, Sarah. I appreciate it.
Sarah Green: That's Harvard Business School Professor Tarun Khanna. And the book is Winning in Emerging Markets: A Road Map for Strategy and Execution. For more, go to hbr.org.