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An institutional context


Themes: Globalisation and international business

Institutional contextProfessor Peter Williamson addresses the gap between the need to adapt strategies and the practical difficulties of doing so in emerging markets

Companies working in foreign markets can improve their chances of success by adapting their strategies to local differences and taking into account aspects of social, political, economic cultural and historic backgrounds.

Leading international management expert Professor Peter Williamson, Honorary Professor of International Management, Cambridge Judge Business School says fresh research shows that most global companies have long understood how to take in the obvious factors of a foreign or emerging market but the stakes have changed.

“It’s moved to more difficult kinds of things that you have to adapt to, like the role of the judiciary or what intellectual property protection means, or the fact that tax rates or tax policies might vary between provinces, as in the case of China.

“The question is now, are companies really able to respond to those more difficult kinds of things that are hard to get your hands around, that can’t be measured quantitatively, but are very important if we are to be successful in emerging markets.”

Professor Williamson adds that by using well-developed tools and techniques companies can adapt to differences in measurable aspects of a foreign market. Among them he lists per-capita income, growth rates and aspects of buyer behaviour.

A key source of different markets, especially in emerging economies, centres on prevailing institutional contexts and although it is widely accepted that companies adapt to respond to these differences, in practice it presents a major challenge.

Professor Williamson welcomed the appointment of Madhu Kannan, CEO of the Bombay Stock Exchange, as Group Head of Business Development for Tata Sons the Mumbai-based holding company of the giant Tata Group.

He says Mr Kannan will bring experience of institutional culture – the ways in which politics, law, and varied cultural attitudes come together in a place like the stock exchange.

“I think it’s a good example of the move from adapting to simple things that we know how to measure like purchasing power or age of the consumers, to these more complicated things we have to adjust to like politics, culture and the way laws or taxation works in particular environment. I think you’ll see more being people being recruited because they have a background in how to manage and understand those institutional differences.”

Peter Williamson is Honorary Professor of International Management at Cambridge Judge Business School.