How to think about strategy for

new emerging markets

Beyond BRIC

December, 2010

1

Dalberg provides strategic advice to funders, NGOs, social entrepreneurs,

corporations, governments and international institutions

World Bank

Broad range of clients and partners

Global presence

Johannesburg

Santiago

New York

Washington DC

Nairobi

San

Francisco

Geneva

Copenhagen

DakarMumbai

Strategic advisory services

• Strategic roadmaps and portfolio design

• Impact assessment

• Multi-stakeholder facilitation

• Recommendations on strategic partnerships

• Due diligence on grantees/investees

• Technical assistance to grantees/investees

• Program/portfolio management

• Operational improvements (for large programs)

• Policy advice (for governments and international institutions)

• Global health

• Access to finance

• Climate change, conservation and energy

• Programs in conflict areas, and post-conflict recovery

• Agricultural development

• Education

• Human rights

• Emerging and bottom-of-pyramid markets

• Corporate supply chains

Expertise in topics critical to global development

Most Danish companies are still producing in Denmark for a Danish or EU

audience

2

Em

erg

ing

mark

ets

Denm

ark

/

EU

Sale

s

Denmark /EU Emerging Markets

Production

Problem child Cash Cow

Falling star Rising Star

Best Seller

Bo Concept

Most

Danish C20

companies

Danish

engineering

firms

Majority of

Danish SMEs

75% of global

economic growth

is taking place

here

Strategy formulation and execution is a different exercise when the context

may change in a matter of months instead of years

3

Economic

trends

Development

sector

conditions

Demand and

opportunity

trends

Development

and

opportunity

trends

Still a reality, but in

decline....

• State own

enterprises that are

very active players

• Legislation not

implemented

• Hiring or firing of

staff can be a year

long exercise

• Red tape is given

Megatrends have a faster

acceleration and deeper impact..

• Urbanisation from rural to urban

• The effects of climate change

• Explotion in the need of health,

agriculture, and energy services due

to demographics

The new emergng reality...

• Explotion in South-South trade

• Local financial are becoming

mature

• Emergence of middle class with

new demands

• Wish for technology leap

frogging

• Governments that increasingly

are becoming assertive and can

stimulate own economy

• Desire for Public-Private

Partnership models

Strategic thinking in frontier markets is a game of additionality

4

Acess Strategy for

frontier markets

Access/par-

tnerships

Value

proposition

Value

proposition

Value chain

Partnering

Total

Economics

and

financing

Barrier of

entrance

How well does your product and business model

align to the needs of the local market?

5

The key challenges

26%

35%

What can be done?

•How to avoid changing price

policy, product features, and

learning a new market in one

exercise

•Avoid having too many

business models running in

parallel due to the often very

diverse market needs and

spending potential of various

segments

•Understand the public and

private market segments and

be willing to change e.g. from

B to C models to B to B

models

•Avoid focusing only on

countries, but give sufficient

attention to the company’s

role in a global or regional

value chain

Value

proposition

•A Swedish house fabrication company

located in Malmø

•Offering: prefabricated houses and local

production partnership

•Product: Structural insulated panels

(SIPs) that are made by sandwiching a

core of expanded polystyrene (EPS)

between two structural boards

How well does the value chain to your target market work?

6

26%What can be done?

•How to recreate a profitable

business in a value chain, where

many of the typical rutine and

commoditized elements are weak

or non-existing

•How to penetrate a market where

specific companies/public

agencies are controlling vital

parts of the value chain?

•Create partnerships with

organisations that can provide

capabilities to close the gaps in

the value chain

•Engage in policy dialogue and

best practices with governments

and potential develop joint

programs

•Establish alliances or acquire

with gatekeeper businesses

Value chain •Across the value chain was obstacles in

origination, process & refining,

packaging, marketing/distribution, and

warehousing

•Also physical infrastructure, skills gab,

and red tape and high tarrifs had to be

addressed

Dalberg client NN, a multinational

agriculture company seeking to enter

African market

The key challenges

Who do you critically depend on in your value chain and what is the structure

of the relationship?

7

35%

•How to find the correct partners

that can make up for the short

comings in the value chains and

eco systems?

•How to constructive the true win-

win situations, so non-traditional

partners also have a long-terms

interest in sustaining the

partnership?

•Use analoges from other

industries or other countries to

find out what features the most

desired partners should have

• Consider all partner options from

alliances, M/A, joint programs,

etc.

•Conduct very serious due

dilligence on potential non-

traditional partners

Partnering

26%What can be done?

The key challenges

By reaching out to 20,000 companies and score 800 institutions we found a new

class of very professional non-commercial partners

The top of the list was a surprice to

many in the sector

Hundreds of programs are being now developed every year

Source: Organization websites (links above), Partnering for Global Development (BCLC), Public-Private

Partnerships Transform Aid (SSIR), AD internal research and analysis

Agency – Program Key Figures Key Trends, Focus Areas and Partners

DANIDA – Dept for

Business

Cooperation & TA

$3M budget

96 B2B

partnerships

Partnerships focus on Danish-based organizations and local partners:

•B2B Partnerships – Long-term business linkages with Danish & local companies

•Innovative Partnerships for Development (IPD) – Partnerships in CSR and SRI

DFID – Business for

Development

2008/2009 DFID

aid: £3.3B (57%)

bilateral, £2.3B

(39%) multilateral

£337B channeled

thru UK NGOs

Works across all sectors of donors and investors. Focus on MNC partnerships:

• Push Boundaries – business practices to support MDG

• Promote growth –create the right conditions to encourage business

• Responsibility –promote successful corporate responsibility

DFID’s recent PPPs focused on transparency, health, & innovative finance facilities:

•Extractive Industries Transparency Initiative (EITI)

•Major funder of the GAVI Alliance

• Helped create International Finance Facility for Immunization (IFFIm)

GTZ – Public-Private

Partnership

437 alliances

$238.4M funds

(thru 2007)

•PPPs: partner through competitions, strategic alliances, financing facility

•Global Compact: coordinates the German Global Compact Network

•CSR: advisor to help companies address and implement CSR practices

•Projects –56% in Asia & Africa; 41% in economic reform

•Partnership Fund Ratio – 37% GTZ, 49% private, 15% other.

SIDA – Dept of Dev

Partnerships

$4-$5M est. budget

for 2010

Partner with private sector, multilaterals, civil NGOs and universities:

•Private sector partnering focused on financing, cooperation forums, dialogue, business

information and competence development.

•Swedish Business for Development (B4D) – linking all businesses SMEs MNCs

USDA - GDA

$9B in alliances

680 alliances

1,700 partners

~$15M program

budget in 2005

Leader in cross-sector partnering, focus on multiple partners and target USAID investment at

~25% and leveraging field staff to drive partnerships.

•16 person team divided by region sector, technical training

•Field-driven partnerships

•2.7:1 avg partners: USAID ratio

•Moving toward Global Framework model

Partnership building has over the past 10 years gone from symbolic to

very operational and value-adding

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Traditional Development:

• Supply-side bias

High

Low

Low HighFinancial development

Social

development

Emerging Partnership Models

Market Based Approach

• Demand-side bias

Complex

Coalition

Structures

Public

Sector

Private

Sector

Source: ”Development Collaboration: None of Our Business?”, Accenture Development Partnerships

How much of the value of your products are you effectively able to capture?

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•How to finance services from

commercial and non-traditional

partners in a way that still makes

ones own products profitable?

•Create public-private partnerships

•Find social investors that are

willing to pay for the additionality

•Connect north and south sales

and marketing efforts

•Find alternative income sources

for partners

Total

economics •Vestergaard Frandsen is a European

company specializing in complex

emergency response and disease control

products (Bed nets, Lifestraw)

•The company have several partnering

models where they don’t bare all the costs

to sell their products:

•Donation model e.g. via partnership

with Rotary

•Carbon credit markets (could over

make their Lifestraw free)

• Joint programs with UNICEF, where

their products in a part of a larger

health package and campaign

•Social investment, where Acumen is

co-funding scaling up mechanisms

26%What can be done?

The key challenges

Questions for discussion

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Questions

•What do you see as the biggest barrier to getting started on

emerging markets?

•What do you anticipate to be the largest strategic challenge to obtain

a correct posture in an emerging market?

• Is there anything that the Danish Government or industry

associations can do to help overcome these additional strategic

obstacles