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Transcript of cgn emerging markets exec insight 3f - CGN .human resources, project management and budget...

  • finding new answers in business.

    by Harsh Koppula

    Global Emerging Markets Establishing operations in emerging markets: Factors for success

    2011 CGN & Associates

    EXECUTIVE BRIEFING

  • EXECUTIVE BRIEFING: EB03 2011 CGN & Associates 2

    Global Emerging Markets Establishing operations in emerging markets: Factors for success operations in emerging markets

    Once a company has successfully identified a new market and made plans to enter it, one of the next steps is to establish operations by developing manufacturing and supply chain capabilities. Companies are committing significant funds to build a critical component of their core operations in a new market, and the risks are significant.

    There are countless recent examples of companies that have invested heavily in emerging markets and failed to generate the output needed for a strong return on investment. Their challenges were too great and their implementation plans were insufficient. For companies to mitigate risk as they establish operations in emerging markets, its important for them to carry over all of the sensibilities and intricacies they bring to project planning in domestic markets. Failing to devote the necessary time, planning and talent to emerging markets opportunities can be costly.

    Full commitment is especially vital today, as emerging markets are vastly more complex than they were even five years ago. The scale of operations is larger and more complicated; economies are more sophisticated; competition is fiercer; expectations are higher; and ever larger sums of money are at risk. As companies develop in emerging markets today, they must be capable of addressing myriad growing challenges: multiple stakeholders, complex procurement processes, evolving labor forces, unstable economic conditions and currency volatility. And they must be stable enough to manage complications both anticipated and entirely unforeseen.

    Anticipating the pitfalls The fact that emerging markets present numerous challenges is nothing new. But todays increased complexity has made these existing challenges more severe and has added new issues that organizations must confront. With so many companies now forced to lower their earnings goals because their global supply chains cant keep up with demand, its important to review the common pitfalls that these organizations encounter. Most of their challenges fit into four established categories: government regulation, human resources, project management and budget management.

    Government Regulation

    Government incentives play a huge role in emerging markets, and organizations generally do a good job tracking regulatory issues. But they often underestimate the challenges that come with compliance. These include knowledge of unionization issues, licenses, permits, duties, draw back and approval time estimates. These challenges need to be factored into an organizations budget and timeline. And organizations need to develop strong relationships with government personnel to ensure they understand and follow the intricacies and demands of meeting local and national regulations.

    Human Resources

    Companies often enter emerging markets in search of cost-effective labor. But filling the multiple ranks of an organization with these resources can prove to be challenging. Labor competition can be difficult to understand. Cultural differences can be challenging to navigate. And local talent may not always align perfectly with organizational needs from a global standpoint. In addition, organizations must also address training, retention and conflict resolution.

    Project Management

    While establishing operations in emerging markets, organizations can become effectively paralyzed by many factors. Most of these challenges germinate in the planning process and then manifest themselves later in the form of project management issues. Problems such as unilateral decision-making can paralyze an organization, as can a lack of key decision authority. Effective project management can mean the difference between success and failure. If teams or individuals are unclear about their roles and responsibilities, the entire project can suffer and momentum can cease.

    Budget Management

    Budgetary issues also often arise from a lack of planning. Whether the budget is undefined or the company is under-resourced, the problem can most likely be traced back to the planning phase. Too often, organizations think they can

  • EXECUTIVE BRIEFING: EB03 2011 CGN & Associates 3

    do more with less. They need to be absolutely clear on defining realistic resource plans and implementation times to project a more accurate budget in advance of securing development funds.

    Obviously, some of these challenges can be identified quite easily. But the difficulty lies in properly addressing them

    before they evolve into significant risks. By anticipating and managing these common pitfalls and making sure you know and understand all of your shareholders and their needs you can avoid risk and position yourself for success in your emerging market.

    Figure 1. The common challenges of emerging markets

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  • EXECUTIVE BRIEFING: EB03 2011 CGN & Associates 4

    Managing the project lifecycle Emerging markets require tremendous emphasis on developing, refining and strictly adhering to a plan that manages the entire lifecycle of a development project. This plan should span five major phases: initiation, planning, execution, control and closure.

    The below chart details what organizations need to address in each of these phases. Here are some of the most important considerations:

    Establish and communicate a project timeline Before you even enter an emerging market, it is absolutely imperative that you map out every step of the implementation process and communicate this plan to every stakeholder in your organization. A well-planned and well-executed timeline can mean all the difference for companies as they develop their manufacturing footprints in emerging markets.

    Figure 2. The 5-step program lifecycle management

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  • EXECUTIVE BRIEFING: EB03 2011 CGN & Associates 5

    The timeline should run from initiation to planning to execution and should continue through the go-live date and beyond. Always keep in mind that your new facility will need to be fully operational from the moment it opens in order to be profitable. Every component of your timeline should be focused on that date, ensuring that your entire organization is striving to achieve the same goal.

    Your timeline should start with project initiation: Define your business objectives, build capable project teams and gather information on industry best practices. Move from there to the planning phase: Create a master plan and

    establish benchmarks, metrics and decision-making processes. Map out the implementation process, from selecting personnel to preparing your construction site. And build a post-construction plan to ensure quality control: Assess performance, review metrics and continually check your organizational structure for signs of fissure.

    Throughout this process, someone from your team must own and control every single aspect of your project. Everyth