How to approach these

very different markets

1 Succeeding in

Emerging Markets

Source: THRIVING IN EMERGING MARKETS, 2011 Harvard Business School Publishing Corporation

Europe

Latvia

Lithuania

Croatia

Hungary

Poland

Armenia

Belarus

Bosnia Herzegovina

Bulgaria

Montenegro

Rep. of Moldova

Romania

Ukraine

Russia

Serbia

FYR Macedonia

Kenya

Togo

Tunisia

Uganda

Zambia

Zimbabwe

Lesotho

Libya

Madagascar

Malawi

Liberia

Mali

Mauritania

Mauritius

Morocco

Mozambique

Namibia

Niger

Nigeria

Rwanda

Senegal

Sierra Leone

South Africa

Sudan

Swaziland

Middle East

Bahrain

Kuwait

Oman

Saudi Arabia

Qatar

United Arab Emirates

Iran

Iraq

Jordan

Lebanon

Syria

Turkey

Yemen

Equatorial Guinea

Algeria

Angola

Benin

Botswana

Burkina Faso

Burundi

Cameroon

Chad

Comoros

Côte d'Ivoire

Djibouti

Egypt

Eritrea

Ethiopia

Gabon

Gambia

Cape Verde

Central African Rep.

Ghana

Guinea

Guinea-Bissau

Countries considered emerging or developing countries?

East Asia & South Asia

Brunei Darussalam

Afghanistan

Albania

Bangladesh

Bhutan

Azerbaijan

Cambodia

China

Pakistan

Fiji

Vietnam

Georgia

India

Indonesia

Kazakhstan

Kyrgyzstan

Lao PDR

Tajikistan

Malaysia

Maldives

Mongolia

Solomon Islands

Sri Lanka

Myanmar

Papua New Guinea

Philippines

Nepal

Thailand

Timor-Leste

Turkmenistan

Uzbekistan

Caribbean

Bahamas

Trinidad and Tobago

Haiti

Dominican Rep.

Jamaica

Latin America

Argentina

Chile

Belize

Bolivia

Guatemala

Guyana

Honduras

Brazil

Colombia

Costa Rica

Uruguay

Venezuela

Ecuador

El Salvador

Panama

Nicaragua

Paraguay

Peru

Suriname

Mexico

2

Africa

Based on IMF, World Band and

United Nations Development

Program (UNDP)classifications

3 The market within these countries

Emerging market population by annual income

In emerging markets there is a great percentage of the wealth at the top, but most of the market demand and growth is not here.

This middle group (2.6 billion people, as of

2005) has discretionary income and spend

on education, health, energy, transportation

and personal care.

This is where great demand growth will be

in the years ahead.

4 billion people live on less than US$2/day

in emerging markets. There is growing

demand here, but most products and

services usually needs supported with

NGO, foundation or government assistance.

4 Studying the market

1. Exhibitions: Present current product at exhibitions in the industry.

2. Customer visits: Visit target users with samples and ask what they

like and dislike and what price is appropriate.

3. Current products on market: Study what similar products are

available in the market now and at what price.

4. Surveys: Do one-on-one surveys to find out what people want.

5. Target group discussions: Prepare a prototype and conduct 20-

person meetings to get opinions on how it can be improved.

Exhibitions

What’s used now.

Customer visits Focus Groups

Surveys

5 Uncover unmet needs

1. User observation: Study how the product is used now and

learn what users are trying to achieve.

2. Application search: Look for alternatives for your type of

product that consumers may buy. Investigate a wide range

of substitutes, not just what your competitors make.

3. Watch for compensating behavior. Discover what jobs

people are not performing well. Find better, less expensive,

faster or easier methods. Look for modifications by users.

4. Search for explanations. Uncover the root causes of

customers’ behavior by asking what people are trying to

accomplish with the goods and services they use.

How products are used

6 Different marketing conditions between

industrialized and emerging markets

Seller Buyer

Bank

Making user aware of my product?

OK

OK

No

good

1. Market research companies: In most emerging markets there are few quality market

research companies. Therefore, a foreign multinational must conduct its own studies

to find the target customer and offer what is needed.

2. Employee recruiting agencies: In most emerging markets there are few quality

executive search companies. Therefore, a foreign multinational must use its own

internal staff initially, then slowly develop and train local staff.

3. Business legal system and business agreement laws: Legal systems and business

laws can be unreliable and not enforced like in advanced nations.

4. Distribution system and transportation services: Distribution and transportation could

be a concern and different than a more advanced country.

5. Credit and payment systems: The local payment methods may be very different and

complicated. They might have to be improved on where possible.

6. Supplier quality and availability: Quite often the required suppliers and materials are

not available, or they are but do not reach the quality standard needed.

7. Local skills & trade school reliability: Technical skills required might not be available

or technical schools that offer those skills are not available.

8. Advertising, customer communications: Can the user read? How can a company

create awareness within the emerging market?

7 Key Emerging Market Strategies

1. Create customized offerings: Considering the company’s expertise and

strengths, notice how products are used in the market and modify current

company products to better serve the local situation.

2. Develop business models to overcome obstacles: Through data

gathering and small pilot runs, find out in detail what the obstacles are to

succeed. Learn what can be done to overcome them and if it is worth

the effort.

3. Deploy cutting-edge technologies: By using available, standardized

advanced technology, create jobs that need little training, experience

and skills (simple deskilled processes). Also, improve both speed and

quality of communication.

4. Tap low-cost labor: Study the cost of purchasing, installing and

maintaining advanced equipment, and compare that cost to local labor

cost. The hiring, training and supervising of local people could be much

less costly, and it can build a highly skilled organization for the future.

5. Build scale quickly: After success in one region, to avoid quick copying

by competition, a company should find trusted partners nationwide and

cover the whole country quickly.

6. Develop local management talent: Local management talent is always

a key to success. Developing local management is vital for growth.

①

④

⑥

②

③

⑤

8

After 15 years, McDonald’s took 80% of the fast-food Russian market.

McDonald’s in the US: McDonald’s outsources most of the supply chain operations

in the US and wanted to find suppliers for Russia in the same way.

Russian local suppliers: There were no qualified local suppliers no matter how hard

they looked.

Current European suppliers: McDonald’s approached all their current European

suppliers to see if they would be interested in Russia. None were interested.

McDonald’s decides to set up its own supply operation:

1. They set up a joint venture with a local partner, the Moscow City Administration,

to identify farmers and bakers.

2. Imported cattle from Holland and potatoes from America.

3. Hired agricultural specialists from Canada to improve farm management

practices to develop local sources.

4. Advanced Russian farmers money for seeds and equipment.

5. Invested in an operation to produce beef, bread products, potatoes, and dairy

products and purchased to specification ketchup, mustard and Big Mac sauce.

6. Set up a fleet of trucks for supply distribution.

7. Set up a financing program with all outside suppliers.

8. Brought in expatriate managers to train all Russian managers on McDonald’s

standards, quality and operating system.

McDonald’s in Russia

Failed Failed Obstacle

9 Capitalizing on women talent

Finding talented people in emerging markets is always a problem.

But, there is a large population of energetic, ambitious, skilled

women in these markets that are very underused.

Foreign companies coming into these markets are finding ways to

recruit, train, retain and support them, so they can improve their life

style and contribute to their community and organization.

To be successful, there are family, transportation and commute

issues that must be addressed.

Universities are a good place to find this female talent.

Helping women build support networks has helped to retain key

women staff.

Offering coaching support has also been a good method of making

women employees become professional.

10 Impact in investing in emerging markets Impact Assessment Framework

Potential changes in human relationships

Sellers Buyers Community

Impact? Impact? Impact?

Potential changes in finances and living standards

Sellers Buyers Community

Impact? Impact? Impact?

Potential changes in skills and human development

Sellers Buyers Community

Impact? Impact? Impact?

Community

Buyer Seller

Standard of living

Skills created

Individual

relationships

Group

relationships

Major foreign businesses moving

into emerging markets will have

an impact on the buyer, seller

and community in general.

Explore what that impact is.

Standard of living

Skills Relationships

11 Hidden risks in

emerging markets

Balance profits with political influence

Most companies involved in international business protect their investments against currency

movement, price changes and other risks with legal contracts, insurance and trade financial

contracted agreements.

These approaches offer little against local government policy risks.

Government expropriation: One policy risk is outward and direct government seizing of foreign

assets. This has disappeared in most countries in recent years, as countries will lose their foreign

investment attractiveness.

Hidden risks: There are hidden risks (laws, procedures, operating and investment requirements)

that must be managed though. Here is how to reduce political risk.

1. Goodwill: When a country experiences problems, that is the best time for a foreign company to

show that it is there to help.

2. Impression creation: Prepare to convince the people and government of the country that wealth

can be created working together.

3. Finding concerns of all stakeholders: Identify all people influenced by the foreign investment.

What are their major worries? Conducting knowledge-transfer and training helps. Support to

develop libraries, schools, computer labs and housing for the poor have proven to be good

investments. Promote that your company is a great country asset regarding their concerns.

4. Study local attitudes: To learn local attitudes, direct consulting and informal chats with

employees, local business partners and supply chain affiliates are ideal. Also, consulting with

professional experts in various fields could be helpful. Other sophisticated risk scenario

computer software analysis could also be helpful.

12

How much should a company try to influence change in the emerging market?

How much should a company adapt to the local market from the products/service/operations in its base market?

How much of a company’s assets should be invested in the emerging market?

Heavily invest in

emerging market

Stay totally away for

emerging market

Heavily maintain core

market strategy

Heavily adapt strategy

to local situation

Influence local emerging

market very little

Heavily influence change in local

emerging market

Strategies to apply in

emerging markets

Profit

Risk

Cost

If done right, working in emerging

markets can greatly increase a

company’s profit as well as secure its

long-term future.

13 Succeeding in

Emerging Markets

Source: THRIVING IN EMERGING MARKETS, 2011 Harvard Business School Publishing Corporation