The Cost of Nationalism

A foreign supplier, once it becomes an important player in a local market, can almost always expect to be pressured to pay tribute to that country's nationalism. This "cost of nationalism" is a price of entry and a condition of continued success.

This pressure goes beyond simply adapting a product. It often involves making significant investments and strategic compromises to support the national goals of the host country.

Forms of Tribute:

• Local Manufacturing: Customers, often under government pressure, will demand that products be manufactured locally to increase local content. This can lead to smaller, less efficient factories and higher costs.
• Forced Licensing and Joint Ventures: To develop a local industry, governments or customers may require a foreign company to license its technology to a local competitor or form a joint venture. This effectively means creating a future competitor.
• Meeting Local Standards: Conforming to unique local standards can add significant cost and complexity.

While it would be preferable to keep the business and technology to oneself, the choice is often to cooperate with these nationalistic demands or to surrender the market entirely. The key is to find ways to benefit from the situation while paying the inevitable tribute.