For any business suffering from the downturn in the developed countries of Europe and North America, the prospect of branching out into the relatively uncharted, but comparably prosperous territories of emerging markets may seem tempting.
Delegates at the recent Emerging Markets summit in London, held by the Economist and the Department for UK Trade & Investment, were told a potential untapped market of a billion consumers was out there to be sold to.
In his keynote speech, business secretary Lord Mandelson stated the economies of the emerging markets and the developed world were inextricably linked and the concept of decoupling — where developing economies would operate distinctly from the west as they matured — was nonsense.
Not all of the emerging markets have been uniformly resilient against the economic downturn - Eastern Europe has fared worse than the UK or US, according to a report out by the UKTI — but many Far-Eastern economies, including the massive Indian and Chinese markets have shrunk much less.
The report, called ‘Survive And Prosper: Emerging Markets in the Global Recession’, co-authored by the Economist Intelligence Unit, also cited Indonesia, Malaysia, UAE and Vietnam as countries western companies were considering entering in the next five years.
Speaking at the conference, Ayman Asfai, group chief executive of Petrofac, Nani Beccalli-Falco, president and CEO of GE International, Ahmet Bozer, president of the Eurasia and Africa group, The Coca-Cola Company and Harish Manwani, president Asia, Africa, Central and Eastern Europe, Unilever gave these pieces of advice about expanding into emerging markets.
- Think locally, but act globally. Products designed for developed markets may be too expensive for emerging consumers. Consider less sophisticated versions, which are cheaper to produce or harder wearing.
- Adjust your business model for each emerging market. Don’t assume the demands are the same in every country. Consumer demographics will vary, as will established buying behaviours. Take into account the variation in infrastructure - from communications technology, to road and rail links.
- Recruit talent from the local market. You have to match growth with intellectual capital expenditure. In the longer term, demand for local talent could become very strong. Consider setting up local learning centres to nurture your own local talent. Many regimes are unhappy about businesses bringing in skilled workers at the expense of their own people.
- Make sure you have a portfolio offer that cuts across the socio economic pyramid of the emerging market. It’s a mistake to think one product will serve the needs of many markets made up of differing consumer demographics. It’s much better to enter with a product set that appeals to low-earners and premium customers too.
- Succeeding in emerging markets is not so much about growing market share and more about market creation. Having the lion’s share of a tiny market won’t impact the bottom line. It’s an entirely different proposition trying to sell to consumers who are unfamiliar with the concepts behind your proposition. Assuming your customers have already realised they need your offer could be a costly mistake.
- Make sure you stick to your core values. They are often your strongest selling point and probably contributed to getting the rights to trade in that market anyway, so you need to uphold them. The code of principles you bring with you should shield you from temptations of yielding to corruption, if it occurs.
- Train your local, indigenous representatives to uphold your code of ethics. It took years to build up your reputation for excellence. It will only take one or two people to destroy it. Don’t assume the local workforce automatically realises the value of your reputation in their country, or that they even understand the value of your corporate culture.
