Emerging markets around the world are full of opportunity. There is a great deal of money to be made and market share to conquer. Still, it takes a brave investor or entrepreneur to decide to run a business in that environment. The challenges are unique, and there are a million outside factors that can destroy your company through no fault of your own.
YPO member Rahul Aggarwal faces these challenges head on every day. Aggarwal is Director of Operations and Business Development at Coast Millers LTD in Dar es Salaam, Tanzania. His family started the company in 1989 as the country was becoming an increasingly free market. Coast Millers imports grain from around the world, and has the capacity to produce over 300 metric tons of flour per day. The company distributes its flour products nationwide to a variety of partners in the Tanzania food industry, and is growing its export business as well. Aggarwal, who speaks 5 languages, was born and raised in Tanzania, and received a college degree in the United States and worked there before returning home. He also completed an executive program on grain production in Switzerland.
On an episode of my podcast 10 Minute Tips from the Top, Aggarwal shared what's exciting about growing a business in an emerging market, and what's cause for concern. Here he shares specific elements that business leaders need to consider in an emerging market:
1. Staffing and Communication
In general, Aggarwal is very bullish on Africa and its business trajectory. But he acknowledges that some elements have progressed further than others. For example, he says, "In Tanzania, it's very difficult to get good talent for technical staff, like production managers, designers, or marketing managers. It's very difficult to find a good caliber, local talent." This deficit has caused an ongoing challenge for Coast Millers. "Many times we have to hire outside, which turns out to be more expensive, and more costly in terms of getting permits and such. It becomes a difficult task, but it's something that we have to do." The company is also working towards developing local talent. Aggarwal says, "We have put systems in to help them grow. In many cases, we even send some of them for training. So we are definitely embarking more on a journey to train our local staff and to try to get them to a standard where they're able to perform their skills." Still, it will take some time before the local population will be able to fully perform all job functions.
2. Keeping Your Guard Up
When comparing his time working in the US versus working in an emerging market, Aggarwal says, "It was completely different...I came back home and it was a complete shock. Everything was different, even the way people talked to each other." Some of these are more serious. He explains, "You have to continue to keep your guard up in a country like Tanzania, because you never know when they're being honest or dishonest." It can be an uphill battle against cultural and governmental forces, and Aggarwal advises, "In most cases, you need to have very strong internal controls in place." It will be an ongoing challenge for Coast Millers and other companies in the region. "It is difficult," Aggarwal admits, "but we have to continue to stay alert."
3. Differing Trends
With continuous globalization, there are more and more trends that are spreading quickly from country to country. In the wheat industry, one such trend is the gluten-free diet. Aggarwal has found that despite the ease of communication, some trends simply don't take hold in emerging markets, and companies need to be aware of local preferences. He says, "In Tanzania, [the gluten free trend] is not a very common phenomenon. It's mainly upper middle class elitists that follow these trends of vegan, gluten free, and all of that." It doesn't mean that it won't hit later: "It hasn't impacted us that much. But it will be something in the future that we'll have to look into," he predicts. "The world is changing so much," Aggarwal contends, so you need to always keep your eyes open and your ears to the ground.
4. Regulatory Bodies
Clearly, one of the hurdles companies in emerging markets have to overcome is the government's learning curve on free markets, and also any cultural norm of corruption. Aggarwal laments, "I think the biggest challenge I had coming back was with regulatory bodies. They would actually come to your factory and cause all kinds of chaos. They'll always find a reason for why you're doing something wrong and really give you a hard time. They'd go to an extent where they'd possibly even close you down and give you a big fine for however many thousands of dollars. I think that was a very difficult thing for me to adapt to." Unfortunately, he does not think the corruption issues are getting much better. "I think Africa has a long way to go in terms of overcoming corruption. It's still going to take some time," Aggarwal fears. Still, the longer you've done business, the more able you are to adapt. "We are at an advantage where we have been in the business a long time, so we're able to navigate through some of these challenges. We're able to find solutions to some of the problems," he says.
On Fridays, Kevin explores industry trends, professional development, best practices, and other leadership topics with CEOs from around the world.