(FORTUNE Magazine) – Are you up to the challenge? Beware. Leading the vanguard of global investors doesn't necessarily make for restful nights. When Swedish ball-bearing maker SKF plunged into Russia, its dream of profits quickly turned into a nightmare. The problem? A small matter of timing. SKF's plant started up in May 1917, six months before the Bolshevik Revolution. Luckily that particular sort of risk has all but vanished these days. In the developing world, business barriers began tumbling long before the Iron Curtain turned into a red carpet. Fewer than 20 foreign investments were expropriated in the 1980s, vs. 423 in the 1970s. From Moscow to Manila, governments have concluded that without freer markets and foreign capital they cannot keep pace in the information age or deliver the goods to their citizens. As a result, we are entering an era where the global marketplace will change and expand more rapidly than ever. For managers, the biggest risk will be failing to sort through their multitude of options fast enough to act -- or react -- swiftly. As the superpowers beat swords into market shares, defense companies must race to develop civilian products. As international capital pours across borders in ever greater amounts -- and remember, America, you've been by far its favorite destination -- companies that concentrate solely on domestic sales and local competitors are begging to be ambushed. -- Where are the opportunities? Most First World businesses still concentrate on the markets of North America, Western Europe, and Japan, which account for just 15% of the planet's population but more than 50% of its output. This overlooks many sizable nations that have begun -- or will begin -- to tread the path blazed in the past 20 years by Asia's industrializing countries. < Among present or former Communist states, newly liberated Eastern Europe holds the most immediate promise. China, 1988's hot topic, became 1989's cold shower after the massacre in Tiananmen Square. The Soviet Union, too, remains a bet for people with plenty of patience (FORTUNE, January 1). But East Germany, Hungary, and Czechoslovakia have a combined GNP larger than China's and relatively well-trained and low-paid workers. Best of all, their exports enjoy easy access to the world's biggest and richest market -- the European Community. They could prove Europe's answer to the Asian tigers. In the Third World, three countries stand out. Indonesia, the fifth most populous nation, has stopped harassing and started attracting foreign investors. The government, which has cut the paperwork it requires by 67%, approved more than $4 billion of new projects in 1988 and 1989. Even more impressive, Mexico has sold off, given away, or shut down two- thirds of its state-owned industries in six years. With only a handful of major industries, such as electricity and railways, closed to foreign investment, Mexico finds that U.S., European, and Japanese multinationals are rushing south of the border (see The World). Finally, consider India. For five years the world's second-largest nation has been steadily stripping subsidies and regulations from its overprotected economy. Thanks to more liberal licensing requirements, foreign investors have never had a better crack at India's consumers. At 150 million strong, the subcontinent's middle class is almost as large as America's -- and growing 20% a year. In 1988 Indians bought six million TV sets, up from only 150,000 a decade before. -- What are the best industries? Capital goods makers should prosper. Paul Lego, president of Westinghouse, has his eye on the ''75% of the world's population that isn't connected to an electrical distribution system.'' Michael Griem, a vice president at A.T. Kearney, the management consulting firm, sees big opportunities in agricultural equipment and know-how and in information systems for factories. All types of infrastructure will be in demand. Even the First World needs more and better bridges, roads, and telephone systems. The rest of the world just needs them. ''Wow'' is the first word James R. Houghton, chairman of Corning, utters when he thinks of the global potential for fiber-optic cable. Says Houghton: ''It's the only technology I know of that's even better for a developing country than for a developed one -- because in a developing country you have no old copper to rip out.'' The Soviet Union's decrepit phone system has only 97 telephones -- and hardly any phone books -- for every 1,000 people; in Eastern Europe the comparable number is 140. But the Soviets won't be kept off the horn forever. Cocom, the organization that polices the West's exports to the East, appears less anxious than before about the sale of high-tech communications. A consortium that includes US West is seeking Cocom's approval to lay an optical cable across the U.S.S.R. US West has also just announced a deal to install cellular phones in Hungary. And selling hardware may not be the only opportunity. Says Richard Ryder, telecommunications analyst for Salomon Brothers in London: ''The whole business of running the system may be up for grabs, because the Soviets lack the management depth to do it themselves.'' -- How about consumer goods? Who can't see long-range opportunities in Moscow, where 95% of all ice cream consumed is vanilla? But are there markets in the East now? Yes, say Western soft-drink makers, which have developed a more truly global business than almost anyone else. PepsiCo already has 70 bottling franchises in Eastern Europe. Even so, Richard Norton, the company's vice president for that region, thinks Pepsi's Eastern bloc sales can jump 50% over the next five years. -- How about service businesses? These are perhaps the biggest international opportunities. By definition, most services cannot be traded because they are consumed where they are created -- at the hotel desk when a tourist checks in, for example. So as barriers to equity investment fall, services will take off. According to data collected by the United Nations, they now account for about half of all foreign direct investment in developed countries and are the fastest-rising component of investment everywhere. Tourism, which brings host countries a hard currency bonus, should boom first. American Express, which already has two cash machines dispensing rubles and dollars in Moscow, is now offering credit cards to Hungarians. Its travel- related business in Eastern Europe rose 20% last year. Days Inns is building seven hotels in Hungary and up to 35 in India. Financial services flock to development like pigeons to a kaiser roll. Says Sir William Ryrie, executive vice president of the International Finance Corp., the World Bank affiliate that lends to private companies: ''There are now 20 countries with credible stock markets'' -- places where you might either raise money or invest it. (For more on investing, see box.) Taiwan, Thailand, and India have joined that crowd. Hungary plans to launch the East's first stock market this spring. Poland and Czechoslovakia could be next. In centrally planned economies, state suppliers have traditionally usurped the role of middlemen. But as the U.S.S.R. and Eastern Europe move toward the market, private distributors and warehousers of goods should no longer be as rare as lemons in winter. Says Jan Vanous of PlanEcon, a Washington, D.C., consulting firm: ''With more investment in retail and wholesale trade, large improvements in efficiency -- and consequently profits -- could be made.'' -- What is the best country for you? That depends on your business, your competition, your tolerance for risk, and a host of other factors. But here's a general tip. In searching for low-cost labor, try to tap the best-educated work force you can find. That's why General Electric is paying $150 million for control of Tungsram, a Hungarian light-bulb maker. Now Jack Welch can put top-flight generals in command of an army of skilled but very inexpensive workers. GE's Magyar muscle costs one-tenth as much as workers at its principal European competitors, Philips of the Netherlands and West Germany's Siemens. -- What are the dangers? You could pick the wrong market. Like many U.S. defense contractors, Westinghouse, which does $2.8 billion of business with the Pentagon, is looking to lift civilian sales. Its electronic systems division has high hopes for equipment that helps control air traffic and spots drug smugglers' planes. The division's target: shrinking defense-related revenues from 78% to 50% of sales by the mid-1990s. But making that switch has often proved difficult. Ask aircraft maker Grumman how it did in the bus business. Devastating new competitors could emerge from hitherto unheard-of places. Did you know, for instance, that Malaysia is already the world's third-biggest assembler of semiconductors? Spaniards, who have thrived as Europe's low-cost carmakers, probably laughed along with everyone else at East Germany's clunky, smoke-belching little Trabants and Wartburgs. Will they still be chuckling if Volkswagen joins its neighbors to the East in a joint venture to produce small cars? Economic reforms could take a lot longer and prove less successful than you expect. Structural barriers to business -- inconvertible currencies, hyperinflation, stifling bureaucracies -- cannot be cut as easily as barbed wire can be. When the World Bank, fresh from revamping Hungary's rubber industry, returned to help the nation's engineering firms figure out how to rejoin the world economy, its team began enumerating the impediments. No fewer than 52 made the first list, among them the lack of a safety net for laid-off workers.

Barter is the traditional way around the currency problem. But goods worth taking in barter are limited, and much of the best has been scarfed up. Says Lawrence Williams, chairman of Caterpillar Overseas, one of the equipment maker's international subsidiaries: ''With barter it's the tough ones you end up with -- the things they can't sell. We've worked with some pretty lowly stuff. We once ended up with a lot of Rumanian men's suits.'' Still, the greatest risk is coming late to breakfast. Already Japan is the biggest foreign investor throughout Southeast Asia. In Eastern Europe, West Germany plays a similar role. Neither regional power is likely to relinquish its lead. But less experienced outside investors enjoy other advantages -- proprietary technologies, say, or even the fact that they're not German or Japanese. Remembering their history, many Eastern Europeans fear becoming dependent on Germany, however benign its present face. South Korea continues to ban cars built in Japan, its former conqueror, though imports of American- made Hondas are allowed. -- How should you manage differently? Let us count the ways: Think global, only more so. In a world without walls, a company without a country has an undeniable edge. Remember the ''triad''? That term, coined by Kenichi Ohmae, a partner in management consultant McKinsey & Co.'s Tokyo office, pointed to the need to develop markets and tap technologies in each of the world's three key markets -- the U.S., Western Europe, and Japan. Now, thanks to the steady advance of democracy and free markets, each point in the triad has developed a new frontier. In Western Europe the revolution of 1989 is redefining the meaning of 1992. Sweden, Austria, and the other nations of the European Free Trade Association have just signed on as associate members of the European Community's club. Before long, Hungary, Poland, and other East bloc countries should win similar status. Beyond them in yet another concentric circle stand North Africa and the Middle East, which will become increasingly important suppliers of labor and raw or unfinished materials. Add them all up, says Williams of Caterpillar, and you've got ''a one-billion-person market -- the biggest game in town.'' One possible result: European standards may become world standards, at least for some products. Westinghouse and GE have both lost business in the Middle East because of Saudi Arabia's preference for electrical equipment designed to Euro-specs. These range from tiny matters, such as metric measurements, to major differences in electrical switching systems. No common market is in prospect for Asia. For one thing, the gap between rich and poor nations is still too wide. But as cross-border investment and trade flows continue to expand there, they inevitably draw the dynamic economies of South Korea and Japan, or Taiwan and Indonesia, ever closer. That, in turn, fuels even faster and wider growth -- and gives rise to new competitors, from both established giants, such as Japan or South Korea, and upstarts like Thailand. Think product lines. Two years ago SKF scrapped its old geographical organization to get closer to its customers. Says Chief Executive Mauritz Sahlin: ''For some products, you may find you need a plant on every continent, but not in every country.'' You'll never hear that advice, however, from a manager charged with a purely national responsibility. Thinking by product line lets you employ different strategies for different products. Gillette sells razors and blades through a ''North Atlantic'' group because the U.S. and European markets are so alike. But its Waterman pens are sold through a conventional international structure. Think alliances. Corning's Houghton is the Metternich of corporate alliances: Sales of companies in which Corning holds a partial equity stake are nearly 50% higher than the sales of its wholly owned businesses. Says Houghton: ''Alliances are the way to capture that window.'' By marrying one party's product to the other's distribution, or one party's manufacturing skill to the other's R&D, alliances are often quicker than expanding your business overseas -- and cheaper than buying one. They don't always make sense. Coca-Cola built its own sales network in Japan rather than risk being the tail on the dog of a local distributor. To work, Houghton maintains, alliances must be true marriages, not dates. He believes that a fifty-fifty deal usually works best because it commits both parties to success. Says Houghton: ''Too many joint ventures fail because they're delegated too far down; you need somebody on the board who can speak for each parent.'' And consider them an aggressive strategy, not a defensive one. ''In some company cultures,'' says Houghton, ''if you suggest a joint venture, you're a wimp.'' Think market share. When a country suddenly becomes attractive to foreign investors, market share, not short-term profitability, has to be the focus. With their big home market, U.S. companies could at one time be picky about investment abroad. No longer. Says Meyer Feldberg, dean of Columbia University's business school: ''When we walk away from a market now, we're creating an opportunity for a European or Japanese company -- and they then use that muscle to come into our market.'' Winners will have to take the struggle to the other guy's turf, as GE hopes to do with Tungsram. That way, says Fred Steingraber, chief executive of A.T. Kearney, ''you cut off your competitors' cash flow at the source.'' Think R&D. A study by Robert Lipsey for the National Bureau of Economic Research shows that a stunning 49% of U.S. multinationals' comparative advantage can be explained by how much they spend on R&D. As cheap labor floods the world from East Europe and other developing countries, a technological edge will be more vital than ever. And here again the U.S. has no monopoly on good ideas. IBM's Nobel Prize-winning breakthrough in superconductivity research, you may recall, was generated in its Zurich lab. For the kopek-wise who don't want to be ruble-foolish, there's a vast untapped source of R&D in Eastern Europe (see box). Rethink career paths. In many companies talk about globalization is globaloney. A recent survey of U.S. executives found that fewer than half of those sent abroad thought the posting helped their careers. If you want good people to go overseas, you can't let international operations remain the managerial dead ends they often are. Look for hotshots in your joint ventures too. The Japanese, in particular, have a lot to learn here. As they shift from relying on exports to running plants abroad, they have so far failed to adapt their highly centralized -- and too often xenophobic -- management style. Steingraber of A.T. Kearney believes they may run into trouble unless they start handing more responsibility over to local executives, as U.S. multinationals learned to do two decades ago. Through the 1990s and beyond, the challenge will be to chart a steady course between paranoia and euphoria. Executives who thrive in the brutal, competitive environment of developed countries, where speed, service, and zero-defect quality are the ball game, may go mad coping with parts shortages and erratic mail delivery in the Third or Second World. And a tightrope walker who dazzles in Indonesia may fall on his Arsch in West Germany. But if there's one thing the history of capitalism teaches, it is that one man's obstacle is another's opportunity. The time to find yours is now.