Thriving in the Turbulence of Emerging Markets

Entrepreneurs in developing market economies face special management challenges. Company leaders in India, Turkey, and Africa discuss their experiences with Harvard Business School's Creating Emerging Markets project.
by Geoffrey Jones

The growth and competiveness of emerging markets is a fundamental reality in global business today. Yet it is often forgotten just how much these countries have changed in a short period of time, how challenging their business environments were even two decades ago, and how difficult it was to build successful businesses.

The desire to capture the scale of this change is the ambitious goal of Harvard Business School's Creating Emerging Markets project, whose new website was profiled in HBS Working Knowledge last year. The Business History Initiative has assembled many interviews with long-standing business leaders from emerging economies across the globe.

They offer compelling insights into how entrepreneurs based in these countries survived turbulence and change, and the lessons that can be learned from their experiences going forward. They also reveal how many successful leaders evolved a strong sense of responsibility for the welfare of their societies as they continue to overcome past legacies of impoverishment.

Three recently added interviews illuminate these themes of transformational change and societal responsibility. The executives profiled are Rahul Bajaj, chairman of the Bajaj Group in India; Güler Sabancı, head of the $14 billion Sabancı conglomerate in Turkey; and Manu Chandaria, chairman of the multimillion-dollar Comcraft Group in Kenya.

Growing In A Slow-moving Economy

Rahul Bajaj

In his interview Rahul Bajaj (HBS MBA '64) voiced the challenges of doing business in India during the decades of the 1970s and 1980s. Bajaj Auto, the leading two-wheeler manufacturer in India, for a long period could do little to fight a slow-moving bureaucracy in a highly regulated country deeply suspicious of the free market. For example, regulators did not allow the company to increase capacity, despite high consumer demand for its economically priced two-wheeler.

For 15 to 20 years, the scooter had a ten-year delivery period, Bajaj recalled in his interview. To those not familiar with India's closed economy at the time, such challenges could be difficult to fathom.

"Nobody outside India understands what that means … instead of going to a dealer and taking a vehicle and going home, you had to make a booking, and your turn would come probably after ten years," said Bajaj.

At one point the Bajaj two-wheeler became so intricately linked to social and cultural practices that it became a necessary dowry item. "You couldn't get married in northern India, in a middle class or lower middle class family, unless the girl's family was ready to give a Bajaj scooter." Yet, things did not improve until the 1990s when liberalization helped change policy.

Bajaj revealed that the company survived the "license raj" era through a commitment to legitimacy and strong family values. "You could expand, but a lot of things were required, bribes, and we would never give a bribe, so our growth was slow. But because the owner was sitting in the company, and everyone was working hard, we did well."

Navigating Uncertainty In Turkey

Güler Sabancı

If the life experiences of Bajaj provide dramatic insights into the business environment in India, those of Güler Sabancı, the first woman to head a top business group in Turkey, builds a valuable body of knowledge related to how business navigated uncertainty in the past in Turkey.

Sabancı, who started her career by working at the group's tire factory, gradually worked her way up the family business, building global partnerships and steering the business through times of political and economic turbulence which resembled those in India. During the 1990s, she recalled, "we had coalition governments, no stability in politics, high inflation and a high interest rate environment." In 2001, she added, "the entire banking system collapsed."

Yet these were exactly the years when the Sabancı Group, and industrial and financial conglomerate, launched new consumer-focused businesses and embarked on successful globalization, establishing new businesses in Latin America and elsewhere. The key to the group's success, Sabancı emphasized in her interview, was the ability to learn from crises and adopt new strategies to navigate through turbulence.

In particular, she and her family emphasized maintaining strong capital equity structures to deal with currency volatility, seeking reliable local partners, and never forgetting long-term opportunities. "For managers and for the leadership, uncertainty cannot be an excuse for not growing. If you take that then you don't do anything," said Sabancı.

The Power Of Good Citizenship

Manu Chandaria

In his interview, Manu Chandaria discussed the challenges faced by Comcraft, a business started by his Asian immigrant father in Kenya, which grew as a multimillion dollar business spread over 45 countries. Comcraft produces steel, plastics, and aluminum products.

Chandaria had the option of taking well-paying jobs after his studies in the United States and India in 1951, but opted to take the risk of working in the small business of his father.

After Kenya's independence from Britain in 1963, Chandaria recalled how the firm experienced many pressures from the government, but survived and flourished through a determination to be seen as good citizens.

"Every time there were political pressures from politicians for support, we always remained neutral and law abiding. Our argument was that if we support one today, what happens tomorrow when they are not in power? To me, they are all rulers, irrespective of the party. Asians are a small minority. Out of 45 million, there are a mere 100,000 Asians. Our business was purely to do what we thought we should be doing and do it well and make very sure that were seen to be doing good and right."

It was not only in Kenya that politics proved a challenge. Chandaria's business survived throughout Africa by virtue of persistence, confidence, and forgiveness. "In Ethiopia when the coup took place and the military government took power, they nationalized all our assets. To date, they have not given them back. We fretted for 10 years. However, we felt that the loss is ours as we are losing the business of 70 million people—equal to the population of Kenya and Uganda put together. So we went back and reinvested.

"In business you cannot keep animosity in your mind because of actions beyond your control."

Like Bajaj, Chandaria resolutely refused to bribe his way out of obstacles. "If we can't do something in the simplest and the most straightforward manner, we'll not do it. Many times, we find that our growth gets retarded, but we believe that it is not the way to do it. As a family, the philosophy has always been that you must remain consistent in your core values. You cannot just play around with them."

A Common Commitment To Society

As they built their businesses against obstacles, all three leaders evolved a passionate belief that their firms needed to be major contributors to solving the problems which had kept their countries and people poor compared to the West.

"There are those with whom I don't agree," said Bajaj, "who say our job is to run industry, and to hell with corporate social responsibility or philanthropy. We have to take care of all stakeholders—I say customers, vendors, employees, shareholders, and the society in which you work. You can't produce a bad quality and high cost product and then say, 'I go to the temple and pray' or that 'I do charity'; that's no good and that won't last, because that won't be a sustainable company. You have to run the best possible company. That's your primary job as a businessman. But in addition you have to take care of the society in which you operate, which enables you to earn that money."

The Bajaj group had a long tradition of philanthropic giving. It dated back to Rahul's grandfather, the founder of the group, who had been the most prominent business leader who supported Gandhi's campaign against British rule in India. He and most of his family spent long periods in jail as a result of their participation in peaceful protests. As a child, Rahul remembered "being in the lap of Gandhi."

Beyond fundamental ethical considerations, Bajaj also argued that corporate responsibility was crucial for the survival of the capitalist system. "Industry all over the world has a bad name, industrialists have a bad name; people think we are greedy, only working for our interests. We need to change this perception," he said.

The same commitment to society was manifested by the Sabancı family in Turkey. The Sabanci Foundation, which was set up with Güler Sabancı's grandmother donating all her wealth towards philanthropic activities, has set up a private university and is a major contributor towards Turkey's higher education.

"In the higher education of this country, I think we did make a difference. We brought some new things into higher education which have been now adopted by others," says Sabancı. As Turkey evolved, so did the societal contributions of Sabancı. "Now Turkey has reached a level where there are many more big family foundations, big wealthy families running a lot of schools and dormitories. So we, at the Sabancı Foundation are adding new things to our portfolio like working more in partnership in the last decade. We are doing projects together with the United Nations, with the Ministry of Interior and the Ministry of Family and education. Joint projects are doing even better advocacy and helping social change as well as supporting the NGOs in the field."

In Kenya, Manu Chandaria was equally convinced of the societal responsibilities of business. "I think that the role of business is to make a profit. But profit is a means, not the end. The end is the difference you make in a society that you live in. One has to ask oneself if one has been able to make a difference. Profit must be there to build bigger and better business. A part of it should go towards making sure the standard of living of the people around is improved."

Chandaria and several members of his family were heavily influenced by Gandhi's ideas when they studied in India. In 1956 he and his brothers persuaded their father to set up the Chandaria Charitable Foundation, and give 10 per cent of the firm's capital to it. The Foundation began by funding scholarships, and then steadily widened its giving. Charitable giving was also heavily influenced by the fact that Chandaria and his family were Jains, one of the world's oldest religions, which prescribed non-violence towards all living things.

"In our business, it is a philosophy to be useful to others, to be friends to others, to be holding the hands of others ... because you have a capacity to hold," Chandaria said. "We always told our children that money is here today; money may not be there tomorrow. A good set of principles and values will remain with you for a lifetime."

Among the wider societal responsibilities that Chandaria felt was to improve the rules of the game under which business operated. One major concern was to facilitate the development of an East African common market. An early attempt to form such a community collapsed because of animosities between governments. Chandaria perceived that the private sector might stand a better chance to create such an organization. "I thought the best way was to persuade the private sector in Kenya, Tanzania, and Uganda to join hands and be one voice to the governments."

In 1997 Chandaria created the East Africa Business Council and became the founding chairman. "The purpose was to make sure the new regulations at the East African community level are acceptable to all three and created a basis so that goods could move from one country to another without any customs duties on them."

As the global economy and many emerging markets appear to be entering a new moment of political and economic turbulence, these and other interviews in the Creating Emerging Markets project provide compelling insights into how sustainable businesses can be built even in the most challenging of circumstances. Additional interviews are scheduled in India, Turkey, and on the HBS campus over the next several months.

Note To Readers

Do you find information from Harvard Business School's Creating Emerging Markets project valuable? How can it be improved? Please e-mail Geoffrey Jones with your thoughts and ideas.

About the Author

Geoffrey Jones is a professor at Harvard Business School.

Post A Comment

In order to be published, comments must be on-topic and civil in tone, with no name calling or personal attacks. Your comment may be edited for clarity and length.
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited
    This is a good piece of research showing, with selective examples, how businesses counter turbulence in developing countries. There could be more such success stories. But things are not very bright on the whole. Problems lead to unease of doing business. Governments do plan well but the operational hurdles at the ground levels persisist. At times, even the Government makes harsh regulations which are not easy to follow. Hence delays and discomfort.
    In India, a recent initiative "Make in India" looks so fine on paper but implementation seems difficult and hence there is a long tedious journey ahead..
    • Harlyn Sianturi
    • Manager Assets & Risk Management, PT Kaltim Prima Coal
    Salute to all three masters, it is a life time achievements. I was born in a small town Balige in Indonesia but I knew well Bajaj scooter back then in 70s. Well done. These enterpreneuers are all truly distinguished people and I hope their examples are followed by many others. Thanks for the good article.
    • Anonymous
    Dear Geoffrey,

    Please be advised of invaluable contribution you are providing to disadvantaged folks in emerging markets:

    I had read the previous series (but unable to watch the videos due to expensive and bad internet connection) along with the one in subject. They provided me with enormous moral support and sanity check.

    The fact that all of the successful leaders chose to stay away from bribery and corruption (the main plague in undeveloped nations) verified my methods in life despite unbearable pressure from family and friends to "grow".

    And by the way, I am from Turkmenistan, the 8th most corrupt country in the world.

    Although I may never be successful in the business sense (maybe because of acumen) but I enjoyed the commonalities found in leaders who genuinely care for societies they live in and most importantly act with utmost integrity. You will find it hard to believe but people around me operate under the principles of squeezing people out of money by every possible means and sitting in the middle of all that makes you just that...a sitting duck full of bullet holes, yet still alive.

    Please be informed that your articles serve as a source of inspiration against the ever prevailing darkness in our side of the world and the only way the middle class in a developing nation will expand is by courageous and generous acts of small people like those stated in the articles.

    Looking forward to reading the next article.
    • Kumar Rajappa
    • Chairman & Managing Director, Navin Housing & Properties (P) Ltd, Chennai, India
    How true ! Being useful to the society in which you operate should form part of the core values of business. And we in our organisation share these values of being useful to our customers and giving them higher value through our products ! The CSR begins with your own customers first and to the community. Being socially responsible and respectful of the laws are fundamental principles. Profits have to be made so that you can reach out to more people with better products and services.