Strategies That Fit the Emerging Market PRSENTATION

7/29/2019 Strategies That Fit the Emerging Market PRSENTATION

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Strategies That Fit The

Emerging Markets

By:

Mukta Garg

Shalini P. Chandra

Sunil Kumar


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Introduction

Developing countries

The fastest-growing market in the world for most products

and services

Many companies shy away from doing business in

these nations.

CEOs are aware that such countries lack the consumer-

data experts, end-to-end logistics providers, and talent

search firms.


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eve op ng countr es s. merg ngmarkets

Developing countries Emerging markets

High risk for foreign investors Risks increasingly manageable

Economically underdevelopedFaster income growth than developed

countries

Technologically inferior Technologically competitive

Low purchasing power Increasing purchasing power

Host government restrictions Host government liberalization

Few significant opportunities for foreign

business

Greater opportunities for foreign

business


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How to mitigate the risks?

1. Analyze each countrysInstitutional context Political and social systems

Openness

Product markets

Labor Market

Capital Market

2. Decide your strategies

Adapt your business model

Change the institutional context

Stay away


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Why Composite Indices Are Inadequate

Companies often target the wrong countries

corporations enter new lands because of senior

managers personal experiences, family ties, gut

feelings, or anecdotal evidence.

Others follow key customers or rivals into emergingmarkets; the herd instinct is strong among

multinationals.


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Companies choosing new markets use tools like

country portfolio analysis and political risk assessment

These tools chiefly focus on the potential profits from

doing business in developing countries but leave out

essential information about the soft infrastructures

there.


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How to Map Institutional Contexts?


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Political and social context

Every countrys political system affects itsproduct, labor, and capital markets.

Managers must also determine howdecentralized the political system is.


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Openness

The economies need to be open because they believe itsbest to enter countries that welcome direct investment

by multinational corporations

Multinationals, therefore, will find it easier to functionin markets that are more open because they can use the

services of both the global and local intermediaries.


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Product markets

Market research and advertising are in their infancy indeveloping countries,

Its difficult to find the deep databases on consumption

patterns that allow companies to segment consumers inmore-developed markets.

There are few government bodies or independentpublications, like Consumer Reportsin the UnitedStates, that provide expert advice on the features andquality of products.


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Labour markets

In spite of emerging markets large populations,multinationals have trouble recruiting managers andother skilled workers

because the quality of talent is hard to ascertain.

There are relatively few search firms and recruitingagencies in low-income countries.

Several Indian companies have sprung up to train peoplefor jobs in the call center business, but no organizationrates the quality of the training it provides.


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Capital markets

The capital and financial markets in developing

countries are remarkable for their lack of

sophistication.

Companies should analyze industry structure only after

they understand a countrys institutional context.


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The three strategy choices

Companies may retain their core business

propositions even as they adapt their business

Models,

They can try to change the contexts or,

They can stay out of countries where adaptingstrategies may be uneconomical or impractical.


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Conclusion

Successful companies develop strategies for doingbusiness in emerging markets that are different from

those they use at home and often find novel ways of

implementing them, too.

While companies cant use the same strategies in all

developing countries, they can generate synergies by

treating different markets as part of a system.

Strategies That Fit the Emerging Market PRSENTATION

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