Emerging Economies: Build a Strategy From Scratch

Building a Emerging Economies Strategy from Scratch

The world of emerging economies is dynamic and full of opportunity, but also rife with challenges. Keeping up with the news surrounding these markets is crucial for any business aiming to expand globally. A well-defined strategy is the key to navigating this complex terrain. But where do you begin when building an emerging markets strategy from scratch?

1. Identifying Target Emerging Economies

The first step is identifying which emerging economies align with your business goals and risk tolerance. Not all emerging markets are created equal. Consider factors like:

• Market size and growth potential: Look at GDP growth rates, population size, and disposable income trends. Countries like India and Indonesia offer vast consumer bases and strong growth forecasts.
• Political and economic stability: Evaluate the political landscape, regulatory environment, and currency stability. A country with a history of political instability or volatile currency fluctuations may present higher risks.
• Infrastructure: Assess the quality of infrastructure, including transportation, communication, and energy. Poor infrastructure can significantly increase operational costs and logistical challenges.
• Ease of doing business: Consider the ease of starting and running a business, including factors like bureaucratic hurdles, corruption levels, and access to credit. The World Bank’s Doing Business report provides valuable insights.
• Cultural factors: Understand the local culture, language, and customs. Cultural differences can significantly impact marketing strategies, product design, and customer service.

Start by casting a wide net, then narrow your focus. For example, you might begin by considering all BRICS nations (Brazil, Russia, India, China, and South Africa) before diving deeper into specific sectors within each.

During my time consulting for a multinational consumer goods company, we initially focused on China due to its sheer market size. However, after conducting thorough due diligence, we discovered that the regulatory environment and intense competition made it less attractive than initially anticipated. We subsequently shifted our focus to Indonesia, which offered a more favorable regulatory landscape and less saturated market.

2. Conducting Thorough Market Research

Once you’ve identified potential target markets, it’s time to conduct in-depth market research. Don’t rely solely on secondary data; invest in primary research to gain a deeper understanding of local market dynamics.

• Consumer behavior: Understand the needs, preferences, and purchasing habits of local consumers. Conduct surveys, focus groups, and in-depth interviews to gather qualitative and quantitative data.
• Competitive landscape: Analyze the competitive landscape, identifying key players, their market share, and their strategies. Understand their strengths and weaknesses to identify opportunities for differentiation.
• Regulatory environment: Stay up-to-date on the latest regulations and policies that could impact your business. Consult with local legal and regulatory experts to ensure compliance.
• Distribution channels: Evaluate the existing distribution channels and identify the most effective ways to reach your target consumers. Consider both traditional and digital channels.
• Pricing strategy: Determine the optimal pricing strategy based on local market conditions, consumer affordability, and competitive pricing.

Statista provides extensive data on market trends, consumer behavior, and economic indicators in various emerging markets. Use this data to support your research and validate your assumptions.

3. Defining Entry Strategy and Business Model

Your entry strategy is how you initially access your target market. The right choice depends on your resources, risk appetite, and the specific characteristics of the target market. Common entry strategies include:

• Exporting: Selling your products or services directly to customers in the target market. This is the simplest entry strategy, but it may not be suitable for all products or services.
• Licensing: Granting a local company the right to manufacture and sell your products or services in the target market. This can be a low-cost way to enter a market, but it also gives you less control over your brand and operations.
• Franchising: A specific type of licensing where you provide a local franchisee with a complete business system, including branding, operations, and marketing.
• Joint venture: Partnering with a local company to create a new business entity in the target market. This can provide access to local knowledge, resources, and networks.
• Foreign direct investment (FDI): Establishing a wholly-owned subsidiary in the target market. This gives you the most control over your operations, but it also requires the largest investment.

Alongside your entry strategy, define your business model. Will you adapt your existing model, or create something new specifically for the emerging market? Consider factors like:

• Product adaptation: Do you need to modify your products or services to meet local needs and preferences?
• Pricing: What pricing strategy will you use? Will you offer premium pricing, competitive pricing, or value pricing?
• Distribution: How will you distribute your products or services? Will you use traditional channels, digital channels, or a combination of both?
• Marketing: How will you market your products or services? Will you use traditional advertising, digital marketing, or a combination of both?

4. Building a Local Team and Partnerships

Success in emerging economies often hinges on building strong relationships with local partners and assembling a talented local team.

• Local talent: Hire local employees who understand the local culture, language, and business practices. Invest in training and development to build their skills and capabilities.
• Strategic partnerships: Identify and partner with local companies that can provide access to resources, networks, and expertise.
• Government relations: Build relationships with government officials and regulatory agencies to navigate the regulatory landscape and advocate for your business interests.
• Cultural sensitivity: Train your employees on cultural sensitivity to avoid misunderstandings and build strong relationships with local stakeholders.

LinkedIn can be a valuable resource for finding local talent and identifying potential partners.

5. Managing Risks and Challenges

Emerging markets present unique risks and challenges that require careful management.

• Political risk: Monitor the political landscape and be prepared for potential political instability or policy changes. Diversify your investments across multiple countries to mitigate political risk.
• Economic risk: Monitor economic indicators and be prepared for potential currency fluctuations or economic downturns. Hedge your currency exposure to mitigate economic risk.
• Operational risk: Implement robust risk management systems to mitigate operational risks, such as supply chain disruptions, infrastructure failures, and security threats.
• Compliance risk: Stay up-to-date on the latest regulations and policies and ensure compliance with all applicable laws and regulations.
• Cultural risk: Invest in cultural sensitivity training to mitigate cultural risks and build strong relationships with local stakeholders.

Consider using a framework like Asana to manage tasks, track progress, and mitigate risks across your emerging markets operations.

6. Monitoring Performance and Adapting

Your emerging economies strategy shouldn’t be static. Continuously monitor your performance and adapt your strategy as needed.

• Key performance indicators (KPIs): Define KPIs to track your progress and measure your success. Examples include revenue growth, market share, customer satisfaction, and return on investment.
• Regular reporting: Establish a regular reporting cadence to track your KPIs and identify areas for improvement.
• Feedback loops: Establish feedback loops to gather insights from your local team, customers, and partners.
• Agile approach: Adopt an agile approach to strategy development and implementation, allowing you to quickly adapt to changing market conditions.

Google Analytics can provide valuable insights into your website traffic, user behavior, and marketing campaign performance in emerging markets.

In conclusion, building a successful emerging markets strategy requires careful planning, thorough research, and a willingness to adapt. By following these steps, you can increase your chances of success and capitalize on the vast opportunities that emerging markets offer. What are the key performance indicators you’ll use to measure success in your chosen emerging market?

A solid emerging economies strategy demands research, adaptability, and risk management. Prioritize identifying target markets, conducting in-depth research, and building strong local partnerships. Monitor performance diligently and adapt your approach as needed. The actionable takeaway? Start small, learn quickly, and be prepared to pivot.