Looking back on my two-decade-long strategic advisory career across multiple markets and industries, it has been a matter of great curiosity for me as to why companies succeed and fail in emerging markets. I have had the great privilege of direct working experience in North America & Europe (first world), African continent (the second world as defined by Ratan Tata) and the Middle East and South Asia (third world). Having also worked with clients in key emerging markets such as Brazil, Poland, South Korea, Turkey, and China, I believe that you need to keep these 8 key factors in perspective for you to succeed.
For definition sake, emerging countries are those with high levels of economic development, usually with rapid industrialization. Some countries, which were formerly developing nations without much opportunity for industrialization, have become emerging nations with unprecedented growth in energy, information technology, and telecommunications. Some unique characteristics define these emerging markets and it takes a very unique approach to succeed.
Understanding the ground reality by yourself
You need to be out there, with your feet on the ground, to understand the realities of what you will be dealing with. There is no substitute for the perspectives that you will gain by being there. You cannot learn about business in Lagos by sitting in Sandton or Dubai. Relying on secondary sources of knowledge or speaking with local business leaders/associations will give you an idea but not the reality. Successful market entry requires that you do your homework by deploying senior leadership and resources on the ground. There is no defined playbook to go by as every emerging market has its own culture and characteristics. So take your time and learn them by yourself before you take the plunge to enter the market. Use this knowledge to develop a regional and country strategy.
Choosing the right business model & market entry strategy
One of the key things to consider while entering an emerging market is to evaluate the local regulatory environment, the legal system, taxation regime, foreign exchange regulations, and understand the regional economic outlook. Developing a good understanding of the government and bureaucratic machinery will be an additional advantage. Like it or hate it, the political overtones/signals will be seen and it will take your diplomatic best to stay afloat. It is not a mandatory requirement that you have to do politics to do business. You just need to be aware of those middlemen. Using all the above knowledge should give you a pretty good idea about the business model ( market shaper, market developer, sophisticated importer, etc ) and the market entry strategy
Identify and build relationships along the value chain
In my experience, having the right partners (distributors, agents, and your staff) and at the same time building, that relationship is going to be a crucial piece of your growth puzzle. You have to invest time and energy, in the relationship and nurture it slowly and surely. Personal relationships go a long way as this is the unique character of the emerging market game. Visiting your distributor once or twice a year is not going to help you build the relationship. So invest time to choose the right partners and then build & maintain the relationship.
Establish a solid local presence as a key ingredient in your market entry strategy
I have noticed that the emerging markets by nature are looking for long term investments and will have a cautious approach at the beginning. You have to show positive intent by establishing a strong local market presence as part of your market entry strategy. Having a global presence will mean nothing if you cannot adapt to the country/ region of focus. Most markets demand that you have a legal presence. Evaluate your go-to-market strategy and establish a strong and solid local presence as part of your long term strategy. There are multiple business models but in my view, having your feet on the ground is absolutely crucial
Deploying Digital and e-commerce solutions are a must
Most of the challenges will emerge from the fact that how efficiently and effectively you can deal with the payments and collections. This is a single biggest challenge for which you need to effectively think about deploying digital solutions. Emerging markets are quite adaptive and receptive to new technologies. Thinking about your E-commerce and digital strategy will be an absolute imperative in the long run. Emerging markets are so adept in using the latest technologies. Carefully evaluate the technologies you want to take to the market
Strengthen your supply chain
I would go to the extent of saying, as far as emerging markets are concerned, is to build up the strategy bottom-up – cities, country, and then the region in that order. You should be ready for challenges in the supply chain that might spring up anytime. Sudden port congestions, union issues, unplanned strikes, and unexpected political developments can throw your supply chain out of gear. So get your supply chain and pricing strategy to the absolute detail possible.
Directly deal with the customer
You need to have a clear understanding of your customer and their requirements from the word go. So in my view, a more direct customer approach is the absolute key. Getting to know the customer intimately and more directly will give you good visibility of how you need to position your product and brand. You can position the global quality brand in the right manner with the customer groups once you know their needs and wants in detail. Customise and develop a more localized, creative product strategy as much as possible so that you can develop a competitive edge.
Proactively manage and mitigate the risk factors
Dealing with emerging markets is a risky proposition and you need to proactively manage the business. After your market entry, you need to ensure that you evaluate the risks regularly and have a robust risk mitigation strategy. Integrate your international and local teams very tightly. When you run business planning sessions, get as much input as possible from the local teams and be sincere in incorporating their requirements. Pay regular visits, pay close attention to their challenges & address them. If you run a sales organization, don’t just ask them just for sales statistics but try and bring those new ideas and solutions that will help them accelerate the growth trajectory.
Conclusion
Emerging markets are a long term margin game. You need to be willing to invest and have the patience to reap the returns. The market size might not look that attractive in the short term but don’t ignore the potential it holds for the future. It takes diligence, persistence, great relationships, calculated decisions, and a long term view to succeed. One thing is for sure; you cannot plan all scenarios upfront and have to be agile/adaptable in your approach. It is a tough grind but surely a rewarding one
I borrow the words of Ross Mclean, Ex-President of Dow Africa "Emerging markets are not for the sissies". It will be interesting to hear your emerging market growth stories and experiences. Do add other factors I might have missed.
