January 2012Senior Leadership

Foreign Markets: The Leadership Challenge

Leading Foreign Markets

They're legendary gaffes: Parker Pens introduced its Quink pen in Spain with a translation of its English slogan, "It won't leak and embarrass you." The multi-million dollar launch, in Spanish, announced that the pen wouldn't get you pregnant. Bermuda-based Bacardi marketed a bitters drink in Germany with the title Pavane, which to Germans sounded a lot like Pavian, meaning baboon.

You might think that experienced, multinational organizations would be better able to navigate across borders, but these language blunders occur with alarming frequency — and they represent just one of the complex barriers companies face as they move into foreign markets. "Everyone recognizes that the world is flat," notes Wharton marketing professor Z. John Zhang. "But not everyone seems to notice is that flat doesn't mean homogenous. There are remarkable differences in cultures, language, and behavioral norms that carry over into the business environment. Bringing your business onto foreign soil without this recognition can set you up for many surprises."

In fact, cultural issues account for a significant percentage of organizational failures in foreign markets. Yet many leaders lack the kind of cultural adaptability necessary for success. Zhang continues, "You need to be sensitive to differences. If you're doing business in China, for example, you may be comfortable with the way people look and speak, which may lead you to assume that the way their businesses are run is very similar to yours. But that assumption is incorrect. There are vast differences beneath the surface."

Zhang cautions that entering a foreign market with any assumptions can be dangerous. "In a foreign business environment, you need to understand different events and decisions, so you rely on assumptions that were formed in your own environment. These assumptions should be left behind. In the foreign market, they don't have the same political systems or ways of interacting, for example. You might learn the hard way that your assumptions don't hold up.

"In China, for example, you may not understand how party leadership and business leadership interact. Titles such as Board of Directors and CEO may be the same, but the people in those roles don't behave the same. Other differences include appointed CEOs, expectations for incentives, ideas about where to take a business, and what to get out of the business."

An easier, and potentially less painful, way to learn is to get a deeper understanding of foreign markets before you dip a toe into them. Zhang and fellow Wharton marketing professor Jagmohan Raju developed the Country Manager Leadership Program to provide management strategies, business acumen, and diplomacy for operating in a cross-cultural context.

Zhang explains, "Wharton programs draw participants with substantial responsibilities from around the world. Deep learning comes from the experience in the room and the diverse network of global peers participants come away with. It is our job as faculty to facilitate in-depth discussions and encourage participants to share their knowledge of and ways of doing business in their home environments.

"In fact," he continues, "many of our participants have had a 'honeymoon experience' in unfamiliar markets. They come to Wharton with specific problems, looking for new perspectives and new ideas. They realize that foreign environments are complicated. There are cultural and language barriers to overcome, as well as new regulations, marketing environments, incentive issues, and business acumen to navigate." Simply put, to succeed in a foreign market, you need much more than best practices from your home environment. Zhang might argue that many of those best practices don't even have a place in your suitcase.