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First published in Aurora, Nov-Dec 2022 Issue.
Why brands must learn to evolve into multinational organisations.
Pakistan’s economy needs growth in exports. No one will refute this. Economists can debate how it should be done but at the end of the day, it is the businesses whose efforts will determine the results. Their level of effort depends on the business confidence in the country, which in turn is driven by external and internal factors such as market trends, government policies and their capacity.
Country risk is an important factor in international trade. Perceived risk can make it easier or more challenging for companies to do business abroad. In either case, understanding the risks at any given time helps in strategising on how to address them.
Economic Risk: Key indicators, along with ratings from international agencies, help paint a fuller picture when evaluating country risk. Some indicators include GDP growth rate, unemployment rate, government finances, monetary policy and currency stability, stability of financial institutions, etc.
Debt Management: Supplementary to economic risk, the country’s capability in managing debt is a critical component of overall risk since high levels can lead to inflation and destabilise the currency. Indicators include debt-to-GDP ratio, current account balance, debt service to exports etc.
Political Risk: Every country has some level of political risk. Factors that translate into political risk include the type of government (democratic vs autocratic), government stability, absence or presence of corruption, access to information and level of transparency, regulatory and policy environment, government support for businesses, law and order, etc.
Structural Risk: Structural factors are long-term fixed elements or systemic issues that impact economic output. This includes geography, physical infrastructure, demographics, social infrastructure, cultural norms, foreign policy, participation in treaties, labour force skills and productivity, etc. It is evident that, based on these criteria, currently Pakistan would be deemed high risk. Global agencies like Fitch and Moody’s have downgraded the country’s ratings. The recent Gallup Business Confidence Index shows that 65% of business owners believe their businesses are facing bad conditions.
While economic volatility can be driven by outside influences in a globally interdependent and uncertain world, political risk and more importantly structural risk, are a result of a country’s own inherent strengths and weaknesses. If a foreigner was reading the newspaper today, they would probably be surprised at how Pakistan was functioning given the maligning of every state institution and the lack of confidence in them expressed by their people. Trust and confidence are two key characteristics of progress. At the country level, Pakistan currently seems to be lacking in both.
However, in business, country risk can be mitigated if a foreign buyer or investor has trust and confidence in the company they are dealing with. In an experiential world, where each interaction is magnified through the global reach of social media, businesses and individuals through their conduct contribute to creating the ‘Made in Pakistan’ perception. So, while Pakistani companies selling abroad face challenges and questions, they help shape perceptions through their interactions with foreign customers. Positive micro-interactions at a business-to-business level can create a groundswell to counter negative macro trends. In the absence of a positive national narrative, companies need to chip away at building through what is in their control – their business conduct.
For a company, the first step is to set their vision for global advancement and select the relevant strategy. The degree of an organisation’s complexity increases as the firm’s international involvement expands. The operations, organisational structure and focus change to reflect the different markets and needs of customers. Typically, organisations begin with exporting a few products/services through an internal department that processes and responds to foreign queries. If the demand increases, the company establishes an office in a foreign country controlled by the headquarters. Progressing further, the company sets up regional centres which act as filters between the headquarter and the country organisations. The ultimate evolution is a multinational matrix organisation with a complex structure and multiple independent profit centres.
Most firms in Pakistan working with foreign customers have not progressed in their international development beyond the early stages. They export directly to foreign buyers or through distributors. A few have offices or representatives abroad. Some tech firms are the exception; they have evolved as multinational organisations by either moving their headquarters to a business-friendly foreign country like Dubai or creating foreign hubs closer to their customers. This has allowed them to circumvent any negative perceptions and limitations that they associate with Pakistan. Such a move can be a practical step in helping customers overcome their initial hesitation of working with potentially high-risk, emerging market companies while allowing the Made in Pakistan brand to evolve as the back office “factory” delivers the service.
Global tech platforms such as those for e-commerce and freelancers also provide SMEs and individuals with an opportunity to contribute to the Made in Pakistan experience. It is estimated that more than one million freelancers are working in various specialised fields (source: The News), which makes it a highly scalable avenue for creating positive interactions.
Given the impact of companies and individuals, the following are a few considerations for them to evangelise the Made in Pakistan brand:
1. Develop a Global Mindset and Build Capacity: At a minimum, take the time to understand the country, category and business and social customs. Larger companies can benefit from diversity. For example, in Pakistan, they could hire interns from abroad through international placement organisations like AIESEC, and in foreign subsidiaries, hire locals who are integrated with the rest of the organisation.
2. Focus on Product and Service Quality: While low prices can help entice a new customer, quality and reliability are more important in retaining customers. Attention to detail is critical. It is an area that needs much improvement in Pakistan.
3. Invest Time and Resources to Understand the Customer and Market Dynamics of the Target Countries: Embrace the information age to learn and act quickly. Given the market uncertainty and disruptive technologies impacting businesses, it is important to gather real-time information about the markets and build a culture to act on it quickly.
4. Foster a Culture and Habit of Learning: Take advantage of knowledge transfer when working with developed markets. More ambitious firms should look at co-creating and joint R&D.
5. Build Trust Through Transparency and Focus on Proactive Problem Solving: Promote constructive discussions and avoid getting caught up in negativity.
6. Ensure Your Brand is Represented Properly: Make sure you have an up-to-date, user-friendly website and promote your company online. Follow consistent and proper brand guidelines for collateral and presentations. Be responsive and follow up on queries quickly. Participate in events with proper preparation. Actively participate and work with sector associations.
7. Act as a Good Global Citizen: Focus on areas such as sustainability, people development and inclusive culture.
To be competitive in the future, Pakistan will need to evolve from a low-cost producer to one that is productive, and innovation-driven. Access to modern education is critical. There is no doubt Pakistan has potential which is often talked about in conferences but to realise it, Pakistan needs a united shared vision and direction followed by actions and a narrative that supports it.
“Your pride for your country should not come after your country becomes great; your country becomes great because of your pride in it.” – Idowu Koyenikan.
Amin Rammal is a marketing technology enthusiast and Director, Asiatic Public Relations. email@example.com