Hidden Risks in Emerging Markets

Entering any new market can be a risky proposition for a company, but political prowess and mastery of new analytic tools can improve your chances of success, says Bennet Zelner, associate professor in the logistics, business and public policy department.

He and co-author Witold Henisz, of the University of Pennsylvania’s Wharton School, have determined best practices for firms to manage the political, social and economic institutions they encounter when conducting business abroad.

Companies should master the art of political spin, says Zelner. And he’s not talking about Washington’s brand of K Street lobbying. Zelner advises having an ear to the ground in new markets, using data-mining technology to monitor news and conversations online and in the media. Combined with natural language parsing software — which can code sentences for negative and positive connotations — companies can learn a lot about a region’s social norms and values and use that information to assess risk.

“You can use this data to identify the really critical stakeholders and develop an influence strategy,” he says.

Zelner says keeping tabs also helps when crafting a communications strategy and creating a long-term presence.

“If you’re a foreign investor, you need to get the message that you’re not evil to the local population,” Zelner says. “If you understand enough about the place that you’re entering, you can probably engage in a much more effective dialogue with local constituencies. In being a good citizen, you’re also much more likely to have a more sustainable presence in the country.”

By Carrie Handwerker