[Column] Commonalities among companies that fail in emerging markets. How to go beyond ordering products, entrusting agencies, and managing employees

✅ Roughly speaking

• 🧭 Companies experiencing sluggish growth in emerging markets Product ordering, agency management, and client management It's not uncommon to fall into one of these situations.
• 📍 The core of the problem is measuring your company's position Comparison axis This is thought to be because the attacking moves continue to pile up while the situation remains unclear.
• 🛣 The first thing to change in the current situation is to review it, rather than the product itself Sales channel infrastructure It is likely that this is the case in many cases.
• 🔎 When strategies are structured without sufficient market knowledge, it seems that ad hoc responses are inevitable.

✅ Audio summary of this post here

Introduction

This time, we will explain why Japanese companies are prone to stalling in emerging markets.

In my own experience working with overseas expansion into ASEAN countries, I have felt that this "stall" has a surprisingly similar structure across all industries.

In Japan's manufacturing sector, there are many companies with strong technological capabilities and quality control capabilities.
On the other hand, winning strategies that have worked domestically may not necessarily work overseas as well.
In emerging markets in particular, differences that cannot be explained solely by the quality of a product seem to be more easily reflected in sales and market share growth.

If you look carefully at what's happening in these situations, you'll see that there are more structural issues lurking than just a lack of sales capacity.
In other words, it's a matter of not being able to identify where to rely too much, how objectively we can understand where our company is currently located, and what our priorities should be.

In this paper, I would like to organize the typical structures found in companies prone to failure in emerging markets and then examine practical approaches to breaking away from them.

Three common dead ends for failing companies

Companies that don't perform as well as they'd like in emerging markets have several commonalities.
In practical terms, it is Product request , Leave it to the agency , Vassal management It seems that this can be summarized into three parts.

Product request

The first is a state of over-expectation of the product itself to be competitive.

Of course, product quality and performance are important.
However, that alone does not necessarily mean that sales channels will grow, business negotiations will progress, and continuous orders will accumulate.
In emerging markets, product excellence and the strength of the sales mechanisms do not always match.

I think that Japanese companies, having taken technology and quality seriously, tend to have a sense that "if you make something good, you will be appreciated."
However, in reality, there are many situations where factors other than the product, such as how to connect with customers, how to control business practices, how proposals are made, and how after-sales service is provided, determine competitiveness.

Therefore, I believe that for companies that are more confident in their product capabilities, it is more important to have a perspective that seeks reasons other than the product itself for not achieving results.

Leave it to the agency

The second is a state of over-reliance on local partners.

Utilizing local agents and sales partners is a natural option when expanding overseas.
The problem arises when there is a confusion between entrusting the sale to the market and entrusting it to market understanding.

When relying on an agency, it becomes difficult for the company to maintain customer understanding and business flow understanding.
This makes it difficult to see important information such as which customer base the case is resonating with, where the case will stop, and what the competition is armed with.

Even more troubling is that if you look at the numbers alone, they seem to be going around to a certain extent.
So by the time the problem surfaces, time may have already passed with extremely low market resolution.

Not whether to use an agency or not, What to accumulate in your company while using I think that's the question being asked.

Vassal management

The third is a state of dependence on the competence of a particular person in charge.

In overseas operations, excellent expatriates and sales managers can sometimes open up new markets.
That in itself is not a bad thing.
However, if results are only achieved while the person is there, and the flow stops with transfers and retirements, then that does not constitute organizational strength.

The problem with managing the genus is that it lacks reproducibility.
Why it worked, where it earned trust, and what it did to customers are buried as personal experiences without any formal knowledge.

In addition, I think it is better not to take personalization lightly from a business management perspective.
If the assessment of local conditions, partner management, contract management, and customer response decisions are too much at the discretion of individuals, it becomes difficult to verify them later, which can lead to weak internal controls.

Three common problems

Although the forms of ordering products, entrusting them to agencies, and managing employees may differ, they all have one thing in common.
It is, It is difficult to gain knowledge about the organization That is.

As a result, even if problems arise, it becomes difficult to structurally rebuild.
Even if sales slow down, it becomes difficult to pinpoint the cause, making it easier for the players to make mistakes.

In short, I think that failing companies are not just not making an effort, but are often in a structure where effort is difficult to accumulate.

The real weakness is the ambiguity of the "comparison axis."

Companies that can't get out of this situation have an even more fundamental problem.
It measures the company's position Comparison axis is ambiguous.

We need a perspective that measures our company's current location

Competition is relative.
If you don't understand where you stand and where you differ from your competitors, rather than whether you're working hard, you won't see any direction for improvement.

The comparison axis here does not simply mean comparing sales figures of varying sizes.
You need to look at your company's current location from multiple perspectives, including price competitiveness, broadening of sales channels, quality of customer contact, ease of implementation as proposed, strength of partners, and post-order support systems.

Without this example, the priority of the hitter cannot be determined.
It's not about what needs to be changed, but rather how we tend to approach things that are easily changed.

Without a comparison axis, it's not a back-calculated strategy

For example, even if you set a goal to increase sales in three years, you can't chart a path unless you can see where you are and where you stand in the gap with your competitors.

In that case, what happens in many companies is a response that involves building up "what can be done with the current personnel."
Increase the number of exhibitions, add more agencies, redesign promotional materials, and replace personnel.
While all of these are necessary, arranging them without a complete design does not necessarily translate directly to the desired outcome.

What you need to do is work backwards from your goal and figure out which differences to close and in what order.
Nevertheless, if the underlying plan is weak, only the measures will move first.
This seems to be the difficulty for companies whose overseas operations have been stagnant for a long time.

A quick response can happen even in a good company

The problem in this regard is that it's not just companies that don't see the problem that suffer.
On the contrary, the more problem-conscious a company is, the more it may try to act quickly and pile up individual measures.

Of course, there are aspects where taking action is better than not taking action at all.
However, if the comparison axis remains unclear, hypotheses tend to lean more towards assumptions.
This can easily lead to a situation where you are trying hard but not seeing results, or you think you are improving but your competitiveness is not improving.

This is not so much a matter of on-site capabilities, but rather a design issue of what to look at, what to measure, and what to prioritize as a management strategy.
Therefore, I believe that this topic should not be limited to the sales department alone, but rather should be treated as a matter concerning the quality of management decisions themselves.

Why the sales market base should be reviewed first

Now that we've sorted out the comparison axis, the next question is where to start.
What I think is important here is that before we get to the small improvements and marketing enhancements to our products, Sales channel infrastructure It's about reviewing it.

Products that sell and the system for selling them out are two different things

It's important that the product is good.
However, a good product doesn't necessarily translate into sales.
Which markets, which routes, and through whom to deliver it.
If that system is weak, the product's strengths will not be fully realized.

In emerging markets in particular, the structure of business flows and the flow of decision-making often differ from those in Japan, making it difficult to overcome challenges solely through product power.
In practice, I think it's necessary to separate creating products that sell from creating a system that sells them out.

Strengthening sales promotion alone will not yield results

When overseas expansion stagnates, many companies first consider strengthening advertising, exhibitions, and promotions.
Of course, there are situations where increased awareness is necessary.
However, even if the sales receiving platform is weak and only that area is strengthened, it can sometimes be difficult to lead to the development of a business or the continued issuance of orders.

Increasing awareness is not the same as creating a sales stream.
If it's not clear who drives the business, who follows, and who ultimately leads to orders, it's unlikely that promotional investments will be efficient.

The sales platform needs to be designed for both contracts and operations

Reviewing your sales platform isn't just about sales and marketing.
We are closely involved in contractual practices, including agency agreements, retail agreements, exclusivity terms, territory setting, reporting obligations, and customer information sharing.

In other words, if you're going to outsource sales, you need to be clear about who has the information and to what extent your company can be involved.
If this is unclear, you may be using an agency, but in reality, other companies may be holding the gateway to market understanding.

Redesigning the sales market base should be treated as a management challenge

Weak sales channels often don't seem to be a problem that can be addressed through individual sales measures.
The issues of which market to enter, in what form, how to combine direct and indirect sales, and to what extent to take information from the company are all management decisions themselves.

In that sense, we believe that redesigning the sales channel infrastructure should be treated as a management priority, rather than being thrown entirely at the sales department.

Lack of investment in market intelligence weakens strategy

Information is a prerequisite for reviewing sales channels or defining comparative axes.
What is often overlooked here is Investment in market understanding Yes.

It is difficult to create only shallow players from thin information

Business strategy is, in a sense, a series of decisions.
And the quality of that judgment depends largely on the quality of the information you have as a premise.
With customers having little understanding, no visible distribution structure, and no grasp of competing movements, it seems that the players are inevitably prone to being superficial.

There are areas that can be compensated for with effort and perseverance, but if the initial assessment is shallow, there are limits to how careful the subsequent execution can be.
Therefore, it seems more practical to consider information gathering as part of the strategic design itself, rather than as a preparatory task.

Consumer surveys aren't the only thing we need

Market understanding in this context doesn't just refer to consumer surveys.
In reality, more three-dimensional information is needed, such as industry structure, business trends, decision-makers, competitive positioning, the capabilities of local partners, and the regulatory environment.

In the BtoB manufacturing industry in particular, the voice of the end customer alone is not enough.
Without understanding the practical flow of who makes purchasing decisions, who stops implementation, and where projects fall behind, it is unlikely that the accuracy of the strategy will improve.

The more difficult it becomes for companies to view information solely in terms of cost

In practice, many companies are cautious about using their budgets for research and analysis.
I understand how you feel.
However, it's not uncommon to pay higher correction costs later by not investing in information.

Misselecting the market, misselecting partners, misplacing pricing policies, misprioritizing sales channels.
These errors in judgment often seem to be linked to a lack of information in the early stages.
In that sense, I believe it is healthier to view information gathering not as an expense, but as an investment to reduce the probability of failure.

In ASEAN, it is important not to treat differences between countries in a sloppy manner

In emerging markets, including ASEAN, a lump-sum understanding can be dangerous.
This is because each country has different business practices, distribution structures, and regulatory environments.

For example, in Malaysia, Vietnam, Indonesia, and Thailand, the way sales channels are structured and how local partners are engaged is not the same.
Therefore, it seems necessary to design based on country-specific differences, rather than simply developing "success patterns for emerging economies."

Where to start in practice

If we take what has been said so far into practical terms, the important thing is not flashy measures, but not to get the order wrong.

First, make your company's current location visible

The first thing you need is to make your company visible where it is located.
You need to sort out where the differences are compared to the competition: price, sales channel, recognition, and proposal.

If we leave this task ambiguous, we won't be able to determine what our priorities should be.
Conversely, once you start to see where your company stands, the number of players will be significantly narrowed down.

Cut out what's stuck in your sales channels

The next step is to identify where the problem lies in your sales channels.
Whether it's the agency's capabilities, the contract terms, the company's lack of involvement, or how to create local customer contact.
If the problem remains unclear, the solutions for improvement will also become unclear.

The important thing here is not to judge based on vague impressions.
You need to look at multiple pieces of information together: numbers, on-the-ground voices, contractual relationships, and business negotiations.

Allocate the budget appropriately to the information you need

Once you have a clear outline of the problem, the next step is to allocate the budget to gathering the necessary information.
It is realistic to prioritize from what directly impacts decision-making, such as industry research, competitive research, understanding business trends, and reviewing legal regulations and contract practices.

Rather than simply collecting information widely, I think it's important to clarify what information is needed to decide what to do.

Finally, we move from person dependency to mechanism dependency

The final thing we need is to move from going from being driven by the intuition and determination of the people in charge to going from being driven by the organization.
Success stories should not be limited to individual experiences, but should also be preserved as insights for the organization, such as sales methods, partner management, customer information accumulation, and contract management thinking.

In emerging markets, it seems that whether or not a reproducible system is implemented leads to long-term differences rather than short-term results.

summary

Companies that fail in emerging markets often share common characteristics such as relying on products, relying on agents, and managing their operations as vassals.
But the real problem seems to be not so much with any one of them, but with the company piling up individual clippers while the comparison axis for measuring its location remains weak.

In that state, designing backward from the goal becomes difficult, and it becomes easier to rely on ad hoc responses.
That's why I believe the first thing we need to review is not products or advertising, but the sales channels that support sales, and investing in market understanding that will only support that redesign.

There are no shortcuts to expanding overseas.
On the other hand, companies that can see where they are losing, lay the groundwork for sales, and invest in the information they need will likely find it easier to make time their ally.

It's not a fancy prescription, but in practice, I think it's these modest redesigns that will ultimately make a big difference.