Thriving in the Turbulence of
Emerging Markets
Entrepreneurs in
developing market economies face special management challenges. Company leaders
in India, Turkey, and Africa discuss their experiences with Harvard Business
School's Creating Emerging Markets project.
The growth and
competiveness of emerging markets is a fundamental reality in global business
today. Yet it is often forgotten just how much these countries have changed in
a short period of time, how challenging their business environments were even
two decades ago, and how difficult it was to build successful businesses.
The desire to capture
the scale of this change is the ambitious goal of Harvard Business School's Creating Emerging
Markets project, whose new
website was profiled in HBS Working Knowledge last year. TheBusiness History
Initiative has assembled many
interviews with long-standing business leaders from emerging economies across
the globe.
They offer compelling
insights into how entrepreneurs based in these countries survived turbulence
and change, and the lessons that can be learned from their experiences going
forward. They also reveal how many successful leaders evolved a strong sense of
responsibility for the welfare of their societies as they continue to overcome
past legacies of impoverishment.
Three recently added
interviews illuminate these themes of transformational change and societal
responsibility. The executives profiled are Rahul Bajaj, chairman of the Bajaj
Group in India; Güler Sabancı, head of the $14 billion Sabancı conglomerate in
Turkey; and Manu Chandaria, chairman of the multimillion-dollar Comcraft Group
in Kenya.
GROWING
IN A SLOW-MOVING ECONOMY
Rahul Bajaj
In his interview Rahul Bajaj (HBS MBA '64) voiced the challenges of doing
business in India during the decades of the 1970s and 1980s. Bajaj Auto, the
leading two-wheeler manufacturer in India, for a long period could do little to
fight a slow-moving bureaucracy in a highly regulated country deeply suspicious
of the free market. For example, regulators did not allow the company to
increase capacity, despite high consumer demand for its economically priced
two-wheeler.
For 15 to 20 years,
the scooter had a ten-year delivery period, Bajaj recalled in his interview. To
those not familiar with India's closed economy at the time, such challenges
could be difficult to fathom.
"Nobody outside
India understands what that means … instead of going to a dealer and taking a
vehicle and going home, you had to make a booking, and your turn would come
probably after ten years," said Bajaj.
At one point the Bajaj
two-wheeler became so intricately linked to social and cultural practices that
it became a necessary dowry item. "You couldn't get married in northern
India, in a middle class or lower middle class family, unless the girl's family
was ready to give a Bajaj scooter." Yet, things did not improve until the
1990s when liberalization helped change policy.
Bajaj revealed that
the company survived the "license raj" era through a commitment to
legitimacy and strong family values. "You could expand, but a lot of
things were required, bribes, and we would never give a bribe, so our growth
was slow. But because the owner was sitting in the company, and everyone was
working hard, we did well."
NAVIGATING
UNCERTAINTY IN TURKEY
Güler Sabancı
If the life
experiences of Bajaj provide dramatic insights into the business environment in
India, those of Güler Sabancı, the
first woman to head a top business group in Turkey, builds a valuable body of
knowledge related to how business navigated uncertainty in the past in Turkey.
Sabancı, who started
her career by working at the group's tire factory, gradually worked her way up
the family business, building global partnerships and steering the business
through times of political and economic turbulence which resembled those in
India. During the 1990s, she recalled, "we had coalition governments, no
stability in politics, high inflation and a high interest rate
environment." In 2001, she added, "the entire banking system collapsed."
Yet these were exactly
the years when the Sabancı Group, and industrial and financial conglomerate,
launched new consumer-focused businesses and embarked on successful
globalization, establishing new businesses in Latin America and elsewhere. The
key to the group's success, Sabancı emphasized in her interview, was the
ability to learn from crises and adopt new strategies to navigate through
turbulence.
In particular, she and
her family emphasized maintaining strong capital equity structures to deal with
currency volatility, seeking reliable local partners, and never forgetting
long-term opportunities. "For managers and for the leadership, uncertainty
cannot be an excuse for not growing. If you take that then you don't do
anything," said Sabancı.
THE
POWER OF GOOD CITIZENSHIP
Manu Chandaria
In his interview, Manu Chandaria discussed the challenges faced by Comcraft, a
business started by his Asian immigrant father in Kenya, which grew as a
multimillion dollar business spread over 45 countries. Comcraft produces steel,
plastics, and aluminum products.
Chandaria had the
option of taking well-paying jobs after his studies in the United States and
India in 1951, but opted to take the risk of working in the small business of
his father.
After Kenya's
independence from Britain in 1963, Chandaria recalled how the firm experienced
many pressures from the government, but survived and flourished through a
determination to be seen as good citizens.
"Every time there
were political pressures from politicians for support, we always remained
neutral and law abiding. Our argument was that if we support one today, what
happens tomorrow when they are not in power? To me, they are all rulers,
irrespective of the party. Asians are a small minority. Out of 45 million,
there are a mere 100,000 Asians. Our business was purely to do what we thought
we should be doing and do it well and make very sure that were seen to be doing
good and right."
It was not only in
Kenya that politics proved a challenge. Chandaria's business survived
throughout Africa by virtue of persistence, confidence, and forgiveness.
"In Ethiopia when the coup took place and the military government took
power, they nationalized all our assets. To date, they have not given them
back. We fretted for 10 years. However, we felt that the loss is ours as we are
losing the business of 70 million people—equal to the population of Kenya and
Uganda put together. So we went back and reinvested.
"In business you
cannot keep animosity in your mind because of actions beyond your
control."
Like Bajaj, Chandaria
resolutely refused to bribe his way out of obstacles. "If we can't do
something in the simplest and the most straightforward manner, we'll not do it.
Many times, we find that our growth gets retarded, but we believe that it is
not the way to do it. As a family, the philosophy has always been that you must
remain consistent in your core values. You cannot just play around with
them."
A
COMMON COMMITMENT TO SOCIETY
As they built their
businesses against obstacles, all three leaders evolved a passionate belief
that their firms needed to be major contributors to solving the problems which had
kept their countries and people poor compared to the West.
"There are those
with whom I don't agree," said Bajaj, "who say our job is to run
industry, and to hell with corporate social responsibility or philanthropy. We
have to take care of all stakeholders—I say customers, vendors, employees,
shareholders, and the society in which you work. You can't produce a bad
quality and high cost product and then say, 'I go to the temple and pray' or
that 'I do charity'; that's no good and that won't last, because that won't be
a sustainable company. You have to run the best possible company. That's your
primary job as a businessman. But in addition you have to take care of the
society in which you operate, which enables you to earn that money."
The Bajaj group had a
long tradition of philanthropic giving. It dated back to Rahul's grandfather,
the founder of the group, who had been the most prominent business leader who
supported Gandhi's campaign against British rule in India. He and most of his
family spent long periods in jail as a result of their participation in
peaceful protests. As a child, Rahul remembered "being in the lap of
Gandhi."
Beyond fundamental
ethical considerations, Bajaj also argued that corporate responsibility was
crucial for the survival of the capitalist system. "Industry all over the
world has a bad name, industrialists have a bad name; people think we are
greedy, only working for our interests. We need to change this
perception," he said.
The same commitment to
society was manifested by the Sabancı family in Turkey. The Sabanci Foundation,
which was set up with Güler Sabancı's grandmother donating all her wealth
towards philanthropic activities, has set up a private university and is a
major contributor towards Turkey's higher education.
"In the higher
education of this country, I think we did make a difference. We brought some
new things into higher education which have been now adopted by others,"
says Sabancı. As Turkey evolved, so did the societal contributions of Sabancı.
"Now Turkey has reached a level where there are many more big family
foundations, big wealthy families running a lot of schools and dormitories. So
we, at the Sabancı Foundation are adding new things to our portfolio like
working more in partnership in the last decade. We are doing projects together
with the United Nations, with the Ministry of Interior and the Ministry of
Family and education. Joint projects are doing even better advocacy and helping
social change as well as supporting the NGOs in the field."
In Kenya, Manu
Chandaria was equally convinced of the societal responsibilities of business.
"I think that the role of business is to make a profit. But profit is a
means, not the end. The end is the difference you make in a society that you
live in. One has to ask oneself if one has been able to make a difference.
Profit must be there to build bigger and better business. A part of it should
go towards making sure the standard of living of the people around is
improved."
Chandaria and several
members of his family were heavily influenced by Gandhi's ideas when they
studied in India. In 1956 he and his brothers persuaded their father to set up
the Chandaria Charitable Foundation, and give 10 per cent of the firm's capital
to it. The Foundation began by funding scholarships, and then steadily widened
its giving. Charitable giving was also heavily influenced by the fact that
Chandaria and his family were Jains, one of the world's oldest religions, which
prescribed non-violence towards all living things.
"In our business,
it is a philosophy to be useful to others, to be friends to others, to be
holding the hands of others ... because you have a capacity to hold,"
Chandaria said. "We always told our children that money is here today;
money may not be there tomorrow. A good set of principles and values will
remain with you for a lifetime."
Among the wider
societal responsibilities that Chandaria felt was to improve the rules of the
game under which business operated. One major concern was to facilitate the
development of an East African common market. An early attempt to form such a
community collapsed because of animosities between governments. Chandaria
perceived that the private sector might stand a better chance to create such an
organization. "I thought the best way was to persuade the private sector
in Kenya, Tanzania, and Uganda to join hands and be one voice to the
governments."
In 1997 Chandaria
created the East Africa Business Council and became the founding chairman.
"The purpose was to make sure the new regulations at the East African
community level are acceptable to all three and created a basis so that goods
could move from one country to another without any customs duties on
them."
by Geoffrey Jones
http://hbswk.hbs.edu/item/7702.html
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