Chemical companies need to update their old management tactics to win in emerging markets.
The decline in chemical companies’ shareholder returns in recent years has been driven largely by the problems in emerging markets. In China, in particular, Western chemical companies need to get away from me-too product strategies and rethink old management tactics.
Western companies should consider the following approaches, extrapolated from BCG’s six-pronged Smart Simplicity framework:
Managers should spend less time on organizational design and lengthy planning processes, and more time building their understanding of customers and the local business community. Incentives that drive these market-focused behaviors are crucial.
Western chemical companies in emerging markets invest an inordinate amount of time debating the size of various markets and their own shares. Managers should have the discretion to delegate some of this work and to reallocate resources to business development and building supplier and distributor relationships. The proliferation of staff in departments titled Strategic Marketing, Regional Marketing, and Industry Marketing should be a red flag.
In emerging markets, local sales and marketing executives need to be able to make their own decisions about customer prioritization, commercial terms, and technical account development. Giving decision-making responsibility to multiple leaders can also prevent any one leader from amassing too much power.
Such policies could include greater tolerance for mistakes, the inclusion of managers in succession planning, or bonuses linked to performance on local language tests. The policies could also include more flexible holiday schedules or more generous travel accounts for families.
Managers can become rooted in their thinking and resistant to outside input, and recruiting and promotion based on loyalty—rather than merit—compounds the problem. Successful companies look for team members—regardless of nationality and formal technical skills—who can challenge the sometimes ethnocentric perspective of local executives.
If career success at a company can be achieved by controlling information and influencing the design of key performance indicators, that’s a problem. Instead, Western chemical companies operating in emerging markets should reward managers and executives who put their energy into building successful businesses. Such rewards won’t guarantee higher shareholder returns, but they are an important start.