“We cannot enter into alliances until we are acquainted with the design of our neighbor.  We are not fit to lead an army on the march unless we are familiar with the face of the country—its mountains and forests, its pitfalls and precipices, its marshes and swamps.  We shall be unable to turn natural advantages to account unless we make use of local guides.” 

This quote is a perfect exemplification of the dilemma as well as strategies that MNCs may wish to explore to deal with when they “march” into a foreign market.  Typical challenges MNCs often encounter in a foreign market are the entrenched local taste or culture-specific preferences which could hardly change overnight (i.e., “mountains and forests”), poor road conditions or the labyrinthine network of distributors which could hamper MNCs’ product distribution (i.e., “pitfalls and precipices”) and tight government regulations which heavily constrain the set of available options (i.e., “marshes and swamps.”).  Therefore, it is fundamental for MNCs to make use of “local guides” to achieve a victorious expansion.  In different situations and countries, local guides could take on thousands of faces and it is a crucial task for MNCs to identify who is the right guide to facilitate a battle on a foreign land.

For instance, it took McDonald’s 14 years to expand its franchise into Russia.  McDonald’s faced a stark reality at the beginning—there was no reliable supply chain; Rubble was not convertible; local economy was shaky; political environment was unstable.  However, McDonald’s persevered with their faith in their superior food and customer services and their dedication to make McDonald’s Russian’s McDonald’s.  They taught local farmers how to grow their specific type of potato, convinced college graduates that McDonald’s is the best place to work (McDonald’s in Russia have the highest percentage of college graduates as working staff), accepted Rubble in the store (vs. hard currencies such as German Marks or U.S. Dollars) in spite of Ruble crisis, entertained Russian journalists with free taste-testing McDonald’s meals to gain free publicity, and lastly, and most importantly, worked with city government in land acquisition, ownership of the franchise and logistics such as supply of power and electricity.  Because of their perseverance, and more importantly, their rapport with Russian people and government, McDonald’s in Pushkin Square in Moscow is one of the grandest in the world—served over 30,000 people on its opening day, serving over 7.5 million customers a year, with annual sales close to $18 US Dollars. 

Even launching a product in a mature market such as the United States still requires the stewardship of local guides.  When Pokemon was first launched, there were doubts that a Japanese cartoon/anime craze Pocket Monsters could never reap the same success in the United States as it had reached in Japan.  The key challenge is a cultural one.  After all, American kids and Japanese kids have different playing patterns; translations of Pokemon names from Japanese into English could not capture the underlying spirit and meaning of the characters; the toy market in the United States is saturated with millions of options.  However, Nintendo Japan did their job beautifully by selling the intellectual rights to Nintendo North America (NOA).  NOA employed 4Kids, a small integrated entertainment company in New York, as their exclusive licensing agent in the United States.  4Kids later helped NOA create what Wall Street Journal later referred to as “one of the great marketing bonanzas of our time” and reap 4500 million US dollars in the United States.  To a larger extent, 4Kids is not just a local guide who led NOA to find top franchisers in toy industry such as Hasbro and Wizards of the Coast to produce Pokemon toys and game cards.  4Kids is also the “eyes” and “ears” of NOA, envisioning a powerful and vertically integrated Pokemon brand from the very beginning.  They were persistent in introducing and developing Pokemon TV series and getting Warner Brothers involved in making Pokemon movies.  Pokemon Empire would not have existed without Pokemon movies and TV shows, which drove and intensified the needs and demands of Pokemon toys and cards.

MNCs have their inherent advantages when entering foreign markets—their abundant financial resources, advanced technologies, superior products, powerful brands and seasoned marketing and management skills.  A lot of times, MNCs conquer foreign market via acquisition and wholly owned subsidiaries.  Though these expansion strategies enable MNCs to exert tight controls on their brand image and product quality, there are some insurmountable cultural barriers that require local guides to step in to redesign products as well as promotional activities.  For example, Dupont has been involved in the Chinese cookware market, licensing its non-stick technology Teflon Finishes to local manufacturers to use on pots and pans.  In spite of its efforts, sales had never reached expectations.  Chinese consumers had traditionally used a different type of cookware than western consumers, preferring round-bottomed steel woks to flat-bottomed fry pans and sauce pans.  Chinese cooking processes differ from western cooking methods, favoring relatively higher temperatures for shorter periods of time with frequent stirring.  The high heat and frequent stirring could cause abrasions on the non-stick properties of the finish.  The most challenging part is Chinese consumers’ perception of cookware.  Traditional Chinese consumers believed that cooking in iron woks is good for a person’s health, while non-stick cookware is not.  Obviously, to Dupont, Chinese cookware market was full of “marshes and swamps.”  To deal with them, Dupont had no choice but work closely with local manufacturers in developing the non-stick cookware market, designing advertising programs, point-of-sale displays and product demonstration, and developing new products tailored to Chinese cooking habit. 

Consumers in emergent market are increasingly aware of global products and global standards.  But they are often unwilling, or unable to pay global prices.  That is one of the primary reasons that MNCs tend to target at a niche market, or at a small/wealthier segment of consumers, who live in the city, endorse Western values, lifestyles, and more importantly, have financial resources to afford luxury and premium Western products.   However, there is a huge segment of consumers in rural areas who tend to be ignored by MNCs.  Maybe, the low-income, rural consumer segments in foreign markets are exactly the reason why MNCs need the help of local guides, or they are the very reason why many local companies continue surviving MNCs’ attacks without becoming MNCs’ local guides.

While a substantial amount of academic and practitioner has accumulated addressing the points noted, there is still much to learn. For example, while we understand that there is a need for local guides (and hence the literature base on host country partnerships, etc.) have we been able to isolate the process through which this knowledge is funneled. We, in marketing, have spent much time talking about issues such as market orientation, knowledge management, and similar issues. However, how much is really known as to the "hows" of this process. Clearly, much research is needed to focus not on the importance of local partners (as most recognize this need), but rather how to select a local partner, how to coordinate with a local partner, and how to learn from a local partner.
 

Dawar, Niraj and Tony Frost (1999), “Competing with Giants: Survival Strategies for Local Companies in Emerging Markets,” Harvard Business Review, March-April, 119-129.

Fournier, Susan (2001), PokemonTM: Catch them all, Harvard School of Business

Kotabe, Masaaki & Kristiaan Helsen (2001, 2nd Edition). Global Marketing Management.  Toronto: Wiley & Sons.

Moon, Youngme, and Kerry Herman (2003), McDonald's Russia: Managing a Crisis, case published by Harvard School of Business.

Neupert, Kent (1999), Du Pont Teflon: China Brand Strategy, case published by Richard Ivey School of Business, the University of Western Ontario.