(FORTUNE Magazine) – WHEN A FLAT-BROKE country like Vietnam or Burma starts looking for Western investment, should your company answer the call? And if so, do you jump right into these risky places or wait for competitors to make mistakes you can learn from? If your instinct as a manager is always to be first, you're not wrong. But understand that for every advantage you turn up, there is an ''on the other hand'' tale to be told as well. If your business depends on one-of-a-kind or limited assets, like historic buildings or oil deposits, you had better bid for them when they go on the block. Once they're gone, they're gone. There is only one Strand Hotel in . Burma, and however run-down it may be today, Somerset Maugham and assorted royals once sat on its terrace and watched the sun set on the British Empire. The turn-of-the-century establishment is now in the hands of Hong Kong hotelier Adriaan Zecha, who grabbed the chance to restore it even though he hadn't seen the hotel since the 1950s. In May, after several trips to Burma to negotiate the deal, he signed a 30-year management contract. Competitors who covet the Strand can forget about it until 2020. Like nervous hosts, countries in need of economic development sometimes promise party favors to the first guests who show up. The early arrivals often have their pick of partners, suppliers, and distributors. Beijing handed out tax incentives and other inducements 12 years ago to show the world that China was once again open for business. The late Clement Chen Jr., a San Francisco architect and hotel developer, made the most of the opportunity. In 1979 he agreed to build and operate the Jianguo Hotel in Beijing in return for such concessions as the right to require his Chinese partner to assume the loan repayment obligations if the deal went bad and a prime location a short walk from the U.S. embassy and other diplomatic compounds. The Jianguo, a modestly designed Holiday Inn look-alike, became the first Western-style hotel in Beijing at a time when foreigners were swarming into the People's Republic. The hotel developed a following so loyal that it remained fully booked even after more elaborate places were built. Says Robert Burns, who heads Regent International Hotels, a chain of luxury hotels headquartered in Hong Kong: ''Clement Chen was the catalyst for the development of Western-motif hotels in China. And because he was the first guy in, they let him write his own ticket.'' But other companies paid a high price for getting in on China's ground floor. Multinational oil companies accepted unattractive terms for drilling leases off the China coast (and found plenty of dry holes). A large American consumer products company thought it would get first crack at potential manufacturing partners. Instead, it got the right to say yea or nay to a short list selected by Chinese bureaucrats. The company was eventually matched with an out-of-the-way and poorly built factory, but went through with the marriage anyway. The only certainty about doing business on the ground floor is that there will be plenty of problems. Headaches can involve contracts or foreign currency and arise because sketchy regulatory codes either don't address your problems or provide different answers depending on where your plant is. Then there is the double-guinea-pig effect: Indigenous bureaucrats and managers must cast aside old habits and learn the mores of international business, while you, Mr. International, must crawl along the local learning curve. Even so, getting in early can yield enormous advantages. Says Jerome Cohen, a New York lawyer who specializes in advising Western companies thinking about investing in China and Vietnam: ''What matters is not when you enter a new market, but how.'' A former Harvard University law professor, Cohen believes American businessmen should study how the Japanese venture into new territory. When China opened, he says, Japanese firms invested heavily in manpower to build relationships with government functionaries, to scout out the best potential partners, and to understand the business environment. Mitsubishi, the giant trading concern, dispatched scores of Chinese-speaking Japanese employees to backwater provinces as well as to major cities. A decade later it is still exceptional for an American or European firm in China to have more than a handful of Occidental employees who can speak the local language. One China hand says that Japanese firms have vastly more human tentacles in China than American companies do, even though total American investment is slightly larger. NEC, FUJITSU, and other Japanese telecommunications equipment suppliers sent advance men to Thailand 20 years ago, just as the country was beginning to modernize its phone system. Because of the close relationships they built with Thai bureaucrats, the Japanese were eventually able to elbow aside Sweden's L.M. Ericsson, the country's main supplier, and freeze out other competitors. By persuading Thailand to base its network on technical standards patterned after those used by Japanese switching-equipment manufacturers, Japanese companies became the country's prime suppliers. Manufacturers entering the market later found that their products just didn't ''plug into'' the Japanese- based system very efficiently. Japanese consumer product companies often advertise their wares years before the products are actually available on store shelves, to pave their way into a new market. When China legalized advertising by foreign companies in the early 1980s, Hitachi, Toshiba, and Toyota, among other Japanese multinationals, began pitching their products on TV and outdoor billboards. Seiko set up a watch display and repair center in Beijing. The idea: to create brand awareness and to stimulate demand for these products when they do appear in China. Some American companies like McDonald's and PepsiCo are also willing to play for a long-term payoff. Patience has probably had as much to do with the success of McDonald's in Asia as its burgers, shakes, and French fries. Take those fries. Daniel Ng, managing director for McDonald's 49 outlets in Hong Kong, has been working with farmers in northern China for the past six years to grow precisely the right sort of long, cylindrical spud for processing into French fries. The farmers didn't understand why their short, squat, perfectly tasty tubers weren't satisfactory until Ng explained how important it is that McDonald's fries look and taste the same at each of its 11,600 stores worldwide. Now McDonald's is moving ahead with plans to open its first restaurants in China. By the end of this year Ng will hoist the golden arches in Shenzhen, just across the border from Hong Kong. Sometime next year, McDonald's hopes to find an acceptable local partner and venture farther into the mainland. Then it will spend at least 12 months training Chinese managers. Says senior vice president Noel Kaplan: ''We like to have the infrastructure firmly established before we go in because we intend to be there forever.'' To get in on the ground floor, Pepsi has twisted itself into a barterer of toys and cement in China, a producer of apple and pear juice in India, and an exporter of vodka and oil tankers from the Soviet Union -- in part to generate hard currency to pay for materials that have to be imported into those countries for Pepsi's soft drinks. THERE ARE TWO reasons why Pepsi travels down these odd and bumpy side roads: First, such routes are the only ones into some countries; second, it wants to get the jump on Coke. ''Our whole history as a company has been one of catching up,'' says Richard Blossom, who oversees most of Pepsi's soft drink operations from Japan to New Zealand. ''We've had greater success in markets like the Soviet Union, where we've pioneered.'' Right now Pepsi is blazing trails in Asia from India (pop. 820 million) to Laos (four million). Seven months ago, after years of tortuous, politicized negotiations, Pepsi finally struck a deal to make and market its concentrate in India, which had kicked out Coke and other Western companies in 1977. Pepsi's return to Laos was fluky. In 1975, Laos nationalized Pepsi's and Coke's bottling plants. The Coke plant closed, but Pepsi's erstwhile franchisee in Vientiane muddled along, short of glass bottles, trucks, and even concentrate. For 11 years the plant filled its well-worn Pepsi bottles with whatever concentrate happened to be available from Laos's Communist friends in Eastern Europe. Then in 1987, after Laos asked Pepsi to return, the company reestablished contact with the Vientiane bottler, which with Pepsi's technical support and supply lines has grown into one of the largest enterprises in Laos. The soft drink company is also checking out Burma, once an important exporter of agricultural products, whose economy was devastated by nearly three decades of socialist rule. In 1988, Burma invited foreign investors to come back, and earlier this year free elections were held that could lead to the ouster of the ruling junta. Foreigners who have since traveled to Rangoon are rhapsodic about Burma's beauty and economic potential. Unocal, Amoco, and other multinationals have negotiated oil exploration contracts and are scheduled to begin drilling in the next 12 months. But the country is still politically unstable, and few foreign companies other than natural resource concerns have more than reconnaissance operations there. Even the exceptions -- like Korea's Daewoo, which has invested in a plant that makes apparel and wants to build a factory to manufacture TVs and home appliances -- are protecting themselves with political-risk insurance policies. Pepsi is spending $2 million or so for a share of a bottling plant outside Rangoon. ''In a place like Burma, you have to be open-minded,'' says Richard Blossom. ''We hope to make money in three to five years. Maybe we will, maybe not. But no one is going to pour $40 million into Burma. It's important for us not to overinvest.'' Vietnam first began courting foreign firms in 1987. It has reduced state subsidies, encouraged private enterprise, and passed laws designed to promote foreign investment. However, there is still a U.S. trade, aid, and investment embargo prohibiting American citizens and companies from dealing with the ''enemy.'' It remains in effect despite the Bush Administration's dramatic decision last summer to begin talking directly with the government of Vietnam about negotiating a settlement among Cambodia's various warring factions. While Japan, Britain, and other countries publicly support the U.S. embargo, ) their companies are gaining competitive footholds in Vietnam. About one-third of Vietnam's total foreign trade is with Japan. Siemens of Germany recently landed a contract to install a telecommunications link between Hanoi and Ho Chi Minh City. British Petroleum, France's Total, and Royal Dutch/Shell have negotiated drilling rights off the Vietnamese coast. Small, agile Taiwanese companies have arrangements with Vietnamese food-processing companies and producers of ready-to-wear garments. American businessmen may seethe as they watch competitors rush in. But it is not inconceivable, as Jerry Cohen, the New York lawyer, speculates, that Washington may be inadvertently protecting them from wasting a lot of money. The country's inadequate legal system and woeful infrastructure mean that the payoff in Vietnam is apt to be years away. What should U.S. and other multinationals be doing now? Prepare those advance teams: Get to know the right people in Vietnam, and get to know the lay of the land. Hire and train some of the thousands of smart, resourceful Vietnamese who fled their country after the war. Though American executives are free to do these things, Cohen reports that the businessmen he travels with to Vietnam always wonder why they should spend ten days visiting a place where all they can do is talk. But Cohen says, ''After they go to Vietnam, they all wish they had gone earlier. Why? Because dealing with a socialist country takes a long time. If you wait until the embargo comes down to begin your dialogue with the Vietnamese government, then you'll be entering not with the second wave, but with the third or fourth wave.'' RIDING these early waves in Vietnam and Burma will be difficult, but worthwhile over the long term. Along the streets of Ho Chi Minh City, the sprawling commercial center of southern Vietnam, one senses that the country's pulse is quickening. Energetic peasants haul wagons piled high with fruit; carpenters are busy throwing up new shop houses; workers stream into a recently built seafood-processing plant. Says Regent Hotels' Robert Burns, who is eager to open a hotel in Vietnam: ''The Vietnamese people are ready to get something going right now.'' Slowly entering the market are Western consumer goods, including such American products as Marlboro cigarettes and Post-it pads, M&Ms and Snickers, Gillette Foamy and Band-Aids. These come courtesy of middlemen in Singapore and Thailand who ignore the U.S. embargo. Videotapes of American movies are popular, and Rambo, in particular, is very big. On sale recently at a bookstore not far from the Hotel Continental in the heart of the city was a copy of an IBM reference manual for DOS 4.0 software, displayed beneath stolid portraits of Karl Marx, Nikolai Lenin, and Ho Chi Minh himself. Why get in on the ground floor? Because tomorrow's Vietnamese are more apt to be disciples of DOS 4.0 than of Das Kapital.