How to drive firms to global success

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Media captionBosses discuss the challenge of expanding internationally

The leaders of firms seeking global success would do well to heed Aesop's fable of the race between the hare and the slow-moving - but ultimate winner - the tortoise.

Similarly in the global race for growth, it is businesses who are prepared to play the long game that will win.

When Stefano Pessina tried to secure Alliance Boots' first deal in China it was not a matter of simply agreeing terms and then signing the relevant documents.

In fact, it took years of analysis and discussions before executive chairman Mr Pessina was even in a position to try to negotiate terms. Eventually in 2005, Alliance Boots secured an agreement to take a 50% stake in Guangzhou Pharmaceuticals, one of China's largest drug wholesalers.

But even after this, it took a further two-and-a-half years to get the deal approved by all the relevant authorities.

In 2012 it did its second China deal - buying a minority stake in Nanjing Pharmaceutical - but final regulatory approval of this deal is still pending.

Image copyright SHAUN CURRY
Image caption Stefano Pessina says you need a "different mindset" to do business in China

This is the reality of doing business in China - it takes a very long time, much longer than similar deals in the West, says Mr Pessina.

"When you approach China, you have to approach it with a mindset which is slightly different. You have to be prepared to live in a different world. You have to be even more flexible than you have to be when working in the Western world."

Mr Pessina says the Chinese think much longer term compared with those in the West, and he says they also tend to change their mind frequently.

He wants Alliance Boots, via further tie-ups with local partners, to become a major player in China so that it can benefit from its rapid rate of growth, but says it will take at least five years to fulfil this ambition.

Image copyright Reuters
Image caption Firms want to access China's fast rate of growth

The fact that Alliance Boots is a private company makes it easier to carry out these kind of long-term deals.

But for publicly listed firms, which have to report results to investors every three months, it can be a hard sell.

Leadership expert Steve Tappin says companies are often tempted by a "quick fix", for example selling the same product or service worldwide, rather than adapting them for local markets.

"The best business leaders shun this approach. They understand it takes time to build lasting relationships, particularly in cultures that are different to their own," he says.

Online auction site eBay learned the hard way. In 2006 it shut down its main website in China just two years after its launch, having failed to make headway against local rivals. Instead it formed a joint venture with a local partner to help operate an online auction business in the country.

Critics say it failed to recognise that having a strong US brand would not automatically translate in China.

Image copyright AFP
Image caption EBay says Chinese customers are more interested in selling than buying

Current chief executive John Donahoe, who was not at the helm during the firm's first foray into China, says the experience taught eBay to follow consumer trends, rather than try to create them.

In China it has since focused on helping customers to sell goods as it discovered that was where the interest lay. In Russia, on the other hand, demand to buy goods via eBay is high, so the company has concentrated on making the buying process easier.

"We treat each market a little bit differently. They're all connected in a common technology platform, but balancing that local ownership, while also being part of a global technology platform, that's what we're trying to do," says Mr Donahoe.

Image copyright General Electric
Image caption GE is one of the world's largest makers of aircraft engines

Despite the hurdles, there are clearly vast benefits that come from global expansion.

When Jeff Immelt, chief executive of US giant General Electric (GE), took the helm over a decade ago, some 70% of its operations were in the US.

Now it operates in more than 160 countries and more than half of its revenues come from overseas.

For him, targeting deals in developing countries is a top priority because their rate of growth vastly outpaces that of the US and he says GE will never be so US-focused again "unless we are failing horribly".

"I sit in my office every day and say I've got to have higher market share in China than I have in the United States," he says. "I've got to win Brazil, I've got to win Africa. There's no choice. I've got to, I've got to win those countries."

This feature is based on interviews by leadership expert Steve Tappin for the BBC's CEO Guru series, produced by Neil Koenig and Evy Barry.

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