Editor’s note: “International Business Corner” is a weekly column written by Joan Keston that will be providing information for people involved in or considering international operations. Keston is an international business consultant. Over the next several months she will be writing about important issues that international businesses face as they compete in the 21st century global business environment. This article discusses some of the major business characteristics to consider and address in developing countries to understand their point in the development process as a background to doing business there.
RALEIGH – Developing countries can be analyzed and placed along a “Development Spectrum.” A “Business Culture Spectrum Analysis” involves multiple spectrums each pertaining to a specific area or relevant theme.
These spectrums assist in the understanding of a country, its business culture and its relation to other developing or emerging markets. (Many of the terms and concepts used in this article have been coined by the author from years of on the ground experience with developing countries.)
As a general background, it is important to understand the basic political regime and market economy, and the recent past of that country in those regards.
• How far has the country progressed from a communistic regime or a dictatorship?
• Did the country experience colonialism and in what form?
• Is there a ruling oligarchy?
• Is there a democratic form of government?
• How controlled is the economic development plan?
Following are crucial factors in the Business Culture Spectrum Analysis:
Sustainable Governing Institutions
The appearance of sustainable governing institutions is a benchmark symbol in the solid progression of a country away from authoritarian forms of government. The stronger are the governing institutions, the greater are the chances that the political and economic regime will not regress.
This concept has no real significance in the US. It means the point at which a business must consider the government in its operations, almost to the extent of being a partner. In order to grow any further past this point, government connections are important and relationships must be developed and maintained. In most developing countries this ceiling is fairly low.
As countries move further into development, legitimization of government institutions and processes, economic policies, and fiscal controls occur. Some examples:
• The black market which may have been necessary for economic survival and growth is discredited or non-lucrative.
• Transparency begins to occur in all governmental and financial areas.
• Currency becomes stable and freely traded.
• Taxes and tax reporting is equitably enforced.
• Government administration becomes more efficient and equitable.
• Enforcement of existing legislation is vibrant.
A liberal attitude begins to develop towards business. Government strives to facilitate and not impede business growth and development.
Rule of Law
A culture that accepts rule of law is essential for economic growth and development. This will directly affect the risks of doing business in a country and the form of entity a company may choose to employ when entering a country.
The concept of land ownership is essential for economic growth and development.
How strong education is as a development objective may determine how quickly or totally the market may reach its full potential or capacity. It also will be an indicator of the type of opportunities, resources and areas of development the country may experience.
Reform / Key Social Drives
The actual reform directives and key social drives may indicate opportunities present in a given country. The manner in which those reforms are carried out may be indicative of their success, and thus the ability of the country to achieve its potential in the global market.
Although several of these concepts may appear to be theoretical, they have very serious and direct implications for the products and services a company may wish to commercialize in a given country. They will also directly affect the analysis and decision of doing business in a particular country, or the choice of country through which a company may enter a global region.
Joan Keston has experience with mature as well as entrepreneurial companies, domestically and internationally, and with an executive managerial and legal background. She has a deep understanding of the business culture and issues involved in doing business in developing countries as well as Europe. She is the Senior Managing Principal at Keston & Associates, Ltd., an international business consulting firm located in Raleigh, NC, and a partner at Paladin and Associates, Inc. Her firm assists companies establish business operations throughout the world. She can be reached at (919) 881-7764.