Article Analysis: New International Business Perspectives on Pakistan by Khan - Essay Example

Pakistan itself is a newly industrializing country (NIC) and therefore alongside India and China, a big emerging market (BEM). President Musharraf is no longer in power in Pakistan, but the social and economic situation in the country is more or less the same with free market incentives and continued privatization. Thus, it “offers investors a rare, dual strategic opportunity, as both a production and export platform and as a growing market itself”. From a Westerner’s business perspective looking to identify new opportunities for investment, the socio-cultural, political-legal, economic, and competitive environment are all important considerations.

At the same time, however, it is a country beset with numerous problems too. For example, social inequalities are a big problem, its social infrastructure is not fully developed; there have always been tensions with India over Kashmir, and there are American-trained militants in the border areas with Afghanistan. So, whilst Pakistan’s economic growth has tremendous potential, there are also risks and pitfalls peculiar to Pakistan. MNCs and other business people can avoid these pitfalls in many ways.

The major points and issues are listed below. All of these fulfill the need for information and awareness, which is the primary purpose of robust multinational and global market research. Strategic advantages can be gained by being quick, or if possible first, as this helps to gain market share. Telenor for example, is a Norwegian company that has quickly established itself as a major player in the telecom industry in Pakistan. A good understanding of culture “is critical to understand the wide range of cultural identities in Pakistan when developing market segmentation strategies, pricing policies, and promotional strategies”, and for targeted marketing.

Central to this is knowing that the partitioning of India and Pakistan led to the latter being created as an Islamic state. But there are also various sub-cultures, ethnic groups, races, and languages within Pakistan. Understanding must also extend to the way in which the family unit is organized in Pakistan society and the status of women. Non-resident Pakistanis (NRPs) are a significant size and a substantial source of foreign exchange. They can be a valuable “source of market information” because they can serve as “middlemen, business partners, and consultants in trade…”Knowledge of the political situation is very important because the government provides the framework for economic activity.

All political parties are generally in favor of free market incentives and privatization, and policies are favorable towards competition and foreign direct investment. Economic conditions on the whole are favorable because structural impediments to private investment were largely removed in the 1990s, and the stock market has performed well. The availability of credit for domestic financing is easier. The forecasts for exports and growth industries are strong. For example, textiles, leather, and sporting goods are major exporting industries, and government incentives are structured to help export diversification.

On the whole, “the competitive market in Pakistan is healthy and supports a lively free market economy.”Foreign direct investment (FDI) is particularly made attractive “for those firms seeking specialized market niches such as in the IT sector, which has seen massive deregulatory efforts. There are also opportunities in the biotechnology and medical engineering sectors. And, joint ventures are promising in the agricultural and farming sectors. Challenges of bribery and nepotism - “Staying within official channels may reduce, but not eliminate, exposure to these problems when initially entering the Pakistani market.

Country of origin (COO) issues must be carefully considered when choosing Pakistan as an export platform because the benefits must outweigh the costs. An important concern and part of the strategy for new investors is making the initial mode of market entry. Many pitfalls can be avoided if this is successful. In the case of Pakistan, the commercial centers of Karachi, Lahore, and Rawalpindi are options or areas of Sindh and Balochistan where “land and labor costs are modest and incentives are available to set up production facilities”.

Companies can also take advantage of existing reciprocal trade agreements, and FDI opportunities, especially in the IT industry. Cultural differences point out that whilst some areas are receptive to marketing messages emphasizing quality and status, other conservative areas require a more persuasive promotional approach. An effective marketing plan must take into account detailed knowledge of the socio-cultural makeup of Pakistan, its social class structure and wealth categories, how social interaction is approved, knowledge of the important trading centers, up-to-date knowledge of political events and policies, make networks with NRPs, “assert a business culture of their own, consistent with standards in their home country” in order to combat corruptive tendencies.

BOP marketing, as used by Colgate and Unilever for example, is an optional model that may be suitable for certain goods as it can be used for a “mass market, high volume, very low price, and very low margin strategy”. Penetration pricing is essential to its success though and “production costs must be kept low”. Bodies such as the Board of Investment, the Ministry of Finance and Economic Affairs, and the Small and Medium Enterprise Development Authority also provide useful information on market operating conditions.