Deadly Sins of International Business Blog

Yes, we have all heard the stories. Stories of patients in need of treatment in the Western hemisphere traveling to countries such as Thailand or India in need for more affordable healthcare, stories of hospitals in the so-called developed world outsourcing certain diagnostic procedures to the so-called emerging markets, or stories of hospitals in the United States who meet their staffing needs by recruiting nurses and doctors from other countries. In a time when the World Health Organization ranks countries such as Singapore 6^th among the world’s healthcare systems and the United States only 37^th, quality concerns are no longer an issue in discussions about the globalization of healthcare. Only questions of liability are still raised as big impediments to a fully globalized healthcare industry. But even these no longer seem to be barriers for business. In Europe, Capio of Sweden, which operates in several European countries including Norway, Denmark, Finland, France, the United Kingdom, Spain, and Switzerland, is owned by global private equity form Apax. And let’s just look at other world regions. Dubai Healthcare City is the world’s first healthcare free trade zone, attracting global brands such as the Mayo Clinic from the USA, Great Ormond Street Children’s Hospital from the UK, the German Heart Centre or the American Academy of Cosmetic Surgery Hospital. The Cleveland Clinic has entered a contract to manage a hospital in Abu Dhabi and has established similar arrangements with hospitals in Austria, Canada, Egypt and Saudi Arabia. Or, let’s look at recent transnational mergers and acquisitions activity in other world regions. In mid-July US-based private equity firms Carlyle and TPG acquired Australia’s Healthscope for nearly US$ 2 billion. Among several hospitals in Australia, Healthscope also has operations in New Zealand, Malaysia and Singapore.  In late July, Integrated Healthcare Holdings Ltd of Malaysia won a battle against the Indian Fortis group over Parkway hospitals of Singapore. It seems that the pace at which the world of healthcare is becoming flat is accelerating rapidly.

Inspired by the recently announced sale of Volvo to Zhejiang Geely by Ford Motor, I tried to find out what’s happening to British Jaguar Land Rover that has been acquired by Tata Motors of India in 2008. Well, the news has been mixed. In fall 2009, Tata Motors has announced plans to close one of two Jaguar Land Rover factories in England by 2014. This didn’t seem surprising for ailing car brands. It made even more sense when the year-end results showed a loss of $565 million. Most recently however, in March 2010, the US magazine BusinessWeek reported that sales are picking up and Tata’s luxury division has even turned a profit of $141 million in the most recent quarter. New executives have been hired away from GM and BMW, so everything looks good. This will certainly be a transnational acquisition that continues to be of interest.

As the German paper Handelsblatt reports, Volkswagen intends to increase it’s marketshare in India from currently less than 2 percent to about 10 percent. Ambitious plans, especially when one looks at the competitive environment. Although Volkswagen will be introducing the base model of its new Polo at just under 7,000 Euros, its competitors are still ahead in the marketing battle based on price. General Motors’ Beat base model will cost only about 5,000 Euros and Tata’s Nano starts at 1,700 Euros. Other competitors such as Renault, Nissan, Toyota and Honda are on the way to position cheaper models as well. India will be a difficult nut to crack for Volkswagen. Then again, to which other markets would carmakers turn to nowadays. Despite the global economic crisis, India’s market for cars grew by an astounding 16 % in 2009.

As reported earlier (on this blog and elsewhere) Chinese automaker SAIC will enter into a 50:50 joint venture with GM to sell small cars and light trucks in India. There’s not only the GM angle to this move. Viewed from the SAIC angle, memories from the recent past arise. In 2004, SAIC purchased a majority stake from Korean Ssangyong motors which ended in one big disaster with Ssangyong seeking bankruptcy protection. Most recently there have even been allegations of intellectual property theft. The Koreans blamed the Chinese, and the Chinese the Koreans – just what you would expect of two countries that haven’t head the best of relations throughout history. Now, what about India? What makes SAIC confident that the same challenges won’t emerge in India. Or, if they emerge, what makes them believe that they’re now better at handling them. And, would Indian consumers be interested in a predominantly Chinese car?

How is this different? Well, this blog tends to report on how things go WRONG in international markets. Here’s a video from FT.com that talks about how to get your marketing RIGHT in India: http://www.ft.com/cms/a5dd621a-e39d-11dc-8799-0000779fd2ac.html?_i_referralObject=4747400&fromSearch=n

Do you belong to those who think that doing business in emerging markets is difficult? Think about what happens if you’re from an emerging market trying to enter another emerging market. You’ll not only be facing the challenges typical of emerging economies in your target market, but in addition you’ll start feeling those from your home market as well. As happened in the recent case of Bharti Airtel of India and MTN Group of South Africa. The two companies just called off a $24 billion deal Wednesday after several months of intensive merger talks. People on both sides think that the reasons for the deal going sour lie with both the South African and the Indian governments. Among others, the politically motivated intentions to keep a flagship company listed in South Africa simply conflicted with the Indian regulatory environment.

A short while ago, PepsiCo announced that it would invest $500 million in India over the next three years. While PepsiCo has been very successful in India with sales exceeding $1 billion a few years ago, this major investment is definitely a case to watch for everyone interested in international business. Let’s wish them well.