In his book Redefining Global Strategy, Pankaj Ghemawat, describes ways how companies can create value across borders. There are three major strategies, which he describes as the “AAA strategies“:

1. Adaption > to overcome differences
2. Aggregation > to reach economies of scale
3. Arbitrage > to exploit price differences between countries

Many companies from Europe and US entering emerging markets like India try to sell the same product in the same way they do in their home country and thereby reach economies of scale (Aggregation Strategy). Apart from luxury goods and few electronic goods the strategy won’t however work in the long run.

The advantage of strengthening the adaption strategy is threefold:

1. Companies become more respectful of local differences and may not suffer from protectionist actions.
2. Companies willing to adapt and pay more attention to cultural, political and economic impact of their investments will have a better reputation in the long run.
3. And most important: by adapting the strategy to local markets, more opportunities in terms of sales will arise. Companies adapting their products to local needs are more likely to benefit from local consumer needs.

Companies entering new markets like India cannot prosper by continuing the old practice of targeting elite customers in big cities, who tend to be more like customers back home. Western firms will need to take local competitors seriously and consider extending their presence to second-and third-tier cities, where more adaption will be required.

Looking close @ your local customers

It will however be difficult, especially for SMEs to adapt their strategies in different markets (the cost of doing this is high and needs substantial investment in market research and new product development expenditures).

So companies should pick few markets to enter (maximum two to three at the same time) and focus on them for at least two years, before moving into other markets. This requires really understanding selected markets and demonstrating deep commitments there to customers, suppliers, governments, and the public at large.

Especially in India, companies from the West should not push their standardized products and pressing other to conform to their way of doing business. This imperialist approach may seem to work fine in the beginning, but in most cases will back-fire in the long run.

The world is not as flat and globalized as many think and claim. To succeed you need to spend time in the market and have to immerse deep in order to develop a true appreciation of how the culture, politics, and history of a region affects business there. This tends to require months, not weeks or days, especially in India with its many regions, languages and cultural differences.