I was just reading about First Data's growth plans in China. A Private-Equity owned, highly successful, US based First Data with over $10 billion in sales is full of "lessons unlearnt" to corporate world about how to fail in pursuit of growth in developing economies.
Here are my top 5 lessons to offer to First Data:
1. Be a first mover: While risky, first movers into emerging markets have been handsomely rewarded by local markets. Typically, their products and services make a new category in the hearts and minds of consumers. As they may take over local state-owned companies or get-into local joint-ventures, local regulatory authorities tend to be more supportive. Start small with a local team supported by expats initially with a pre-set timeline to turn the local operations to all locals.
2. Have best local-partner: Fortune 500 firms tend to look at emerging markets through the same lenses they use in the US or Western Europe. They demand majority in local ventures, therefore limiting their chances of attracting best of breed local candidates.
3. Invest in long-standing relationships with local authorities and government: Rather than hiring self-acclaimed influential local advisors, start a local branch with a small team. Spend time with local authorities and government officials. Make sure they understand your mandate over a series of meetings at different levels consistently giving the same message. Do remember that these are elected politicians and they would want to hear about your investment dollars and how many new jobs you will create for the country.
4. Recruit a local team, give them full P&L accountability and decision-making responsibility: Expats work only initially to establish processes, systems, business practices, policies and infrastructure of the parent. Make sure you have a succession plan in place for 3+ years. Do not try to manage from headquarters by force-fitting a matrix organization of centralized business divisions. They usually hire a local CEO as a "figure head" for local relationships only while having each global business head to manage local business directly from headquarters, eventually not being to capitalize on local team's entrepreneurial drive and experience which is usually a pre-requisite for success.
5. Be flexible with your business model and value propositions: What has made you successful at home may not be enough in these new tougher markets. Be adaptive and flexible. Listen to your local partner and customers whose price/value expectations may be fundamentally different and new.
You may want to read company's press release:
First Data exploring acquisition or JV for China growth, China CEO says
Here are my top 5 lessons to offer to First Data:
1. Be a first mover: While risky, first movers into emerging markets have been handsomely rewarded by local markets. Typically, their products and services make a new category in the hearts and minds of consumers. As they may take over local state-owned companies or get-into local joint-ventures, local regulatory authorities tend to be more supportive. Start small with a local team supported by expats initially with a pre-set timeline to turn the local operations to all locals.
2. Have best local-partner: Fortune 500 firms tend to look at emerging markets through the same lenses they use in the US or Western Europe. They demand majority in local ventures, therefore limiting their chances of attracting best of breed local candidates.
3. Invest in long-standing relationships with local authorities and government: Rather than hiring self-acclaimed influential local advisors, start a local branch with a small team. Spend time with local authorities and government officials. Make sure they understand your mandate over a series of meetings at different levels consistently giving the same message. Do remember that these are elected politicians and they would want to hear about your investment dollars and how many new jobs you will create for the country.
4. Recruit a local team, give them full P&L accountability and decision-making responsibility: Expats work only initially to establish processes, systems, business practices, policies and infrastructure of the parent. Make sure you have a succession plan in place for 3+ years. Do not try to manage from headquarters by force-fitting a matrix organization of centralized business divisions. They usually hire a local CEO as a "figure head" for local relationships only while having each global business head to manage local business directly from headquarters, eventually not being to capitalize on local team's entrepreneurial drive and experience which is usually a pre-requisite for success.
5. Be flexible with your business model and value propositions: What has made you successful at home may not be enough in these new tougher markets. Be adaptive and flexible. Listen to your local partner and customers whose price/value expectations may be fundamentally different and new.
You may want to read company's press release:
First Data exploring acquisition or JV for China growth, China CEO says
First Data, the Georgia, US-based global leader in financial payment processing, is exploring acquisition opportunities or joint ventures to foster growth in China, President and CEO of Great China Leehum M.Lee told this news service.
First Data could invest around USD 50m to USD 150m for an acquisition or JV, Lee noted, adding that it is keen to gain a majority stake in targets. It would welcome approaches from advisors who have ideal targets or partnering ideas in mind.
With revenue of USD 20m from China last year, First Data is aggressively aiming to scale up that figure to USD 100m within five years, and expects the potential tie-ups with local Chinese players could help it reach that goal, Lee noted. Similar approach has been applied to support its expansion plan in other places in Asia, Lee said and pointed to its joint venture deal last year with Indian bank ICICI Bank, in which First Data invested USD 80m for a more than 80% stake in the JV.
First Data would be especially interested in targets within pre-pay or mobile payment products, and synergies would be sought if the target or potential JV partner has a well-established local client base or complementary products fitting local banking clients’ need, Lee said.
First Data has looked at some potential targets in China, including Shanghai-based All In Pay, Lee noted. However, the deal did not proceed as First Data was keen on a majority stake while All In Pay only agreed to sell a 10% stake.
This news service reported that All In Pay was seeking strategic investments back in August 2010.
A source from All In Pay confirmed that the company had been in “informal contact” with First Data previously, but declined to comment further on previous talks.
Overseas players would need to tie-up with local payment companies as the sensitive financial system is highly regulated by the government, who tends to show preference to local players, a China-based industry source said. An example could be Total System Services, the US-based major competitor to First Data, that acquired a 34.5% stake in China UnionPay Data Co in 2005, the industry source said.
Meanwhile, the Chinese government is now in the process of issuing licenses for third-party payment companies among 17 applicants, the industry source said. First Data is likely to show interest in the licensed targets, and there is market rumors that the licensed list will be released late this month, the industry source noted.
Owned by buy-out firm Kohlberg Kravis Roberts (KKR), First Data reported USD 10.3bn in revenue in 2010.
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