Critical Thinking

A crisis has hit. Now what?
Magazine Contributor
4 min read

This story appears in the June 1999 issue of Entrepreneur. Subscribe »

Capitalizing on what appears to be an excellent expansion opportunity, your up-and-coming business launches a venture in an emerging market. Before that effort can reach the black, however, something goes wrong . . . terribly wrong.

In one extreme case, when a tea importer with a facility in Rwanda got caught in that country's bloody civil war--during which several of his local employees were slaughtered--he had to close down his site until the violence was over. Hopefully, that won't happen to you. But you might face a more common crisis. What if, for example, something goes haywire in a country's economy and its currency is devalued? Importer-exporter Robert D. Hisrich ran into that problem in Russia and was forced to considerably scale back his operations there. Regardless of their situations, the tea trader and ruble victim faced the same dilemma: What should they do next?

If you ever face a similar situation, you'll be in deep trouble if you haven't come up with an answer ahead of time. "Before you enter an emerging market, you need to have a contingency plan," says Dave Schmieg, CEO of Diginet Americas Inc., a Washington, DC-based firm that provides broadband, wireless telecommunications to businesses in Latin America. "You need to determine what you're going to do even before you see a downturn coming."

Schmieg has good reason to be concerned with economic upheavals--his company does 100 percent of its business on foreign shores. Already established in Argentina and Colombia, Diginet is currently building networks in Brazil. While Schmieg says his firm is prepared for just about anything, he finds many U.S. companies are completely unprepared for overseas instability. Should an economic crisis impact your business, here are some proven steps to take:

  • Assess your financial capability. "If you're able to [endure] a tough time, stay in the market. If you can't, get out," says Hisrich. His warning: "If you leave, you'll probably have to strip your company, getting maybe 10 cents on the dollar for your [equipment and merchandise]. No one will pay market value in a crisis."
  • Obtain information. "Information on the local economy is critical," says Forrest Old, vice president of marketing for the Asia-Pacific, Canada, Latin America and receivables management services of Dun & Bradstreet (D&B). "Utilize the nearest U.S. Chamber of Commerce organization. Consult information providers such as D&B and Equifax. A good local partner also comes in handy. You'll need somebody on the ground who can tell you what the status is there."
  • Save your client base. "You're going to lose cus-tomers--the question is how many," Old says. "Develop a customer-retention strategy. You might extend more liberal terms, accept partial payments or negotiate alternative [deals]."
  • Acquire legal representation. "Hire local lawyers," Old advises. "You're going to need someone to help collect payments that are already owed to you. You'll also have breach-of-contract issues to deal with."
  • Shed weight. When the ruble went deep-sea diving, one of Hisrich's companies took a hammering--but Hisrich didn't bail out. "I cut my staff from seven to three," the wine and clothing trader says. "You can also scale back your marketing efforts. If you can get by with a bare-bones operation, do it."
  • Remain focused on your goals. Says Old, "The play in an emerging market is to put yourself in a position of greater growth opportunity than you would in a mature market. If you can get through the tough times, you could have the rapid penetration you were after in the first place."

Christopher D. Lancette is an Atlanta-area freelance journalist who covers small and international business topics for local, national and international publications.


  • : This site from Dun & Bradstreet contains a wealth of information about emerging markets.
  • : The U.S. Chamber of Commerce's site has links to information on its overseas affiliates.
  • : The U.S. Chamber of Commerce and BankBoston have teamed up to offer "Brazil Trends"--a look at economic and political happenings in one of Latin America's most dynamic markets.

Contact Source

Diginet Americas Inc., (202) 274-0040,

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