Kellogg

How to do great business in bad zip codes

June 8, 2013: 5:48 AM ET

Lessons from corporate leaders on how to take your business global.

By David Whitford, editor-at-large

Anheuser-Busch InBev CEO Carlos Brito

Anheuser-Busch InBev CEO Carlos Brito

FORTUNE -- At the start of Friday's session on global go-to-market strategies at the 2013 Fortune Global Forum, moderator Geoff Colvin asked the audience for two shows of hands. First, how many of you work for global companies? That covered most of us. Second, how many of you work for companies that aspire to be global? That covered everybody else.

And yet -- the surprising takeaway from this session? Going global is not always a good idea. Proceed with caution.

Pankaj Ghemawat, professor of global strategy at the IESE Business School in Barcelona, pointed out that very few companies really do operate in every corner of the globe; apart from Coca-Cola (KO), it's hard to think of one. According to Ghemawat, about 90% of U.S. multinationals operate in fewer than 20 countries, and even in countries where they do have a presence, they may be in only one or two key cities.

MORE: Complete coverage of the Fortune Global Forum

Anheuser-Busch InBev (BUD), for instance, has offices in 24 countries worldwide, but CEO Carlos Brito says his company doesn't need to be everywhere. Why aren't you in Africa? Colvin asked him. It's a billion people, it's hot. Sounds like a good place to sell cold beverages.

"Because we believe in focus," Brito said. Africa is growing but not as fast as China, and talent is scarce -- stretch it too thin and "at the end of the day you accomplish little."

When former Kellogg (K) CEO Carlos Gutierrez was U.S. Secretary of Commerce under President George W. Bush, a big part of his job was helping U.S. companies expand overseas. He shared two lessons. One, it may be fashionable to expand into huge markets like India and China, but it's often smarter to start closer to home. In fact, Ghemawat noted, 60% of U.S. companies entering foreign markets for the first time begin with Canada.

Gutierrez's second lesson: like former Secretary of State Madeleine Albright, he admires companies "that do great business in bad zip codes." "Very often if you go to a country where others are fearful to go," Gutierrez said, citing Kellogg's early experience in South America, "20 years down the road you'll find you have a tremendous advantage."

MORE: McKinsey on China's next chapter

According to Gutierrez, one of the greatest challenges of operating overseas -- bridging the cultural gap -- can also be a great advantage in building a strong company culture. When he transferred to Canada early in his career at Kellogg, Gutierrez was dismayed that no one asked him about his experiences at his prior posting in Mexico. He thinks they probably assumed that a developed market had nothing to learn from an underdeveloped market. But "there is nothing more flattering than cultural curiosity," Gutierrez said. "To the extent you can make that part of your company culture, it goes so far toward making people feel important."

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