Any good business strategy starts with an assessment of the
market, including the economic and political factors influencing
demand, and the opportunities for sales in export markets. The best
strategists start by identifying the strengths and weaknesses of
their enterprise in the face of market opportunities. But as recent
events demonstrate only too clearly, broader political and economic
currents can have greater impact on the direction of your
company.
That is particularly important in the case of entrepreneurs in
developing countries, for whom the need to go global is often a
necessity from the outset. Tapping export markets requires
significant risks, even when those markets include the most stable
in the world. With that in mind, entrepreneurs must be familiar
with the forces driving change in global markets and strive for
"'an enabling environment'" to reduce those risks.
The essence of good management and any good strategy is a
willingness to confront reality, rather than wishing that
conditions were more favourable. These are hard times in terms of
expanding access to new markets. The political context has grown
more populist and protectionist in the developed and the developing
world. There is a greater scepticism about trade and globalization
generally in many quarters, and the recent financial crisis has
reinforced that populist shift in domestic politics in many
countries.
The
opportunity
As bleak as that sounds, reversing the trend can hold
significant opportunities for entrepreneurs in developing
countries. Major global companies have a deep stake in keeping the
trading system open, just as developing-country entrepreneurs have
a stake in gaining access to those companies' supply chains. In
order to keep the trading environment open, global companies must
increasingly demonstrate the power of trade to improve lives, as
well as create greater diversity within their own supply
chains.
Entrepreneurs in developing countries can provide the solution.
Incorporating their products and services into a global company's
supply chain offers a practical and profitable way of demonstrating
that trade can impact on developing-world producers and global
consumers alike.
The strategic challenge is, how best to turn that impulse into
action so that governments and global companies reach beyond
rhetoric to real business with developing-country entrepreneurs.
What is needed is not trade capacity-building for the developing
world alone; we need a significant measure of capacity-building in
the developed world as well, particularly as it affects how we
bargain within institutions like the WTO and how we build the other
institutional incentives that systematically expand the economic
freedom of businesses in developing countries.
Markets no longer geographic
What has been lacking so far is a diagnostic tool that would
help both markets identify and remove the barriers to
developing-world entrepreneurs participating in global supply
chains. The starting point for creating this diagnostic tool and
improving the capacity of all players is recognizing that
globalization has fundamentally changed the way we trade. Arm's
length sales between independent exporters and importers no longer
dominate. Most world trade now takes place between affiliates of
global enterprises and the suppliers that make up their global
supply chains.
That is an important shift to understand. Take, for example, the
perspective of an African textiles producer trying to tap into
America's African Growth and Opportunity Act (AGOA). The tariff
preferences offer the producer an advantage not just to export to
the US market but also to US-based firms that can market its
products globally.
The point is, the target market is no longer geographic - it is
a strategy of exporting to enterprises that will take an
entrepreneur's goods, services or ideas global. Take the attitude
of automotive parts manufacturers as another example. They no
longer think of exporting to the US or Japan, but to new
destinations called 'Toyota', 'Daimler' or 'General Motors'. These
places might not show up on a conventional map but they are
landmarks on a commercial map of today's global economy.
Mindful of that shift in the pattern of trade (and the thinking
of the players in this game), we can use the tools that they use to
figure out how to put developing-country entrepreneurs on that
global map. We can also begin to identify and remove the barriers,
which will help us create the enabling economic environment
referred to above.
The tool global businesses apply to their sourcing is a supply
chain map, which identifies the processes and costs associated with
buying product in each individual market. Turning that map around
and examining how global businesses see your market becomes a
powerful way of identifying the internal and external barriers. The
internal barriers represent the domestic reforms needed to help
entrepreneurs compete in this game. The external barriers become
the developing country's negotiating agenda in the context of the
WTO, regional or bilateral trade deals. The map also helps identify
the physical infrastructure that needs to be improved and the
commercial standards that developing-country entrepreneurs must
satisfy.
Redrawing the world trade map
The really interesting part, as in all things, is what flows
from the process of the parties working together to construct this
map. Because it requires input from the public and private sectors
in both the developing and developed world, and because it will
also require contributions from international organizations like
the WTO and the World Bank, it brings together all of the important
parties that are needed to create the enabling environment that is
critical to the success of developing-country entrepreneurs. In the
process, it also introduces them to potential buyers for their
goods, services and ideas.
What will also happen is that the parties involved in the
process will begin to articulate the basis for a broader, more
pro-development trade deal than the one currently on the table in
the now moribund Doha Development Agenda.
Many of the most significant barriers to developed-country trade
with developing-country markets are the same internal barriers that
those developing countries must remove for the benefit of their own
exporters. Equally, that becomes the bargaining chip to gain
removal of developed-country trade barriers and subsidies.
In summary, strategically freeing up entrepreneurs in developing
countries would not only generate greater trade that can positively
transform lives in both the developed and developing world, but it
would also help pave the way for broader reforms in the economic
environment that would pay dividends for years to come.