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International Appetite: Entering Emerging Markets

International Appetite: Entering Emerging Markets

For many businesses, the prospect of going global is an appealing one, offering the chance to increase market share, and ultimately, their bottom line. Increasingly companies are looking to emerging markets as a way to reach customers, and an opportunity to become a category leader.

Emerging market economies are those where a country is moving towards becoming a developed nation. The term became vernacular in the 1980s, and it refers to countries or regions experiencing fast economic growth, based on a formula using GDP and per capita income.

Brazil, Russia, India and China (referred to as BRIC countries) have all experienced rapid growth over the last decade, while South-East Asia, the Middle East and Africa are still starting on their journeys. 

To put "rapid growth" in context, between 1969-2017,

  • - Brazil experienced 55x GDP growth

  • - China 154x

  • - South Korea 199x

  • - Middle East and Africa 90x 

  • - India 45x 

  • - USA at just 19x 

  • - UK at 23x

By 2022 cross-border shopping will make up 20% of all e-commerce, with sales predicted to reach an incredible $630 billion. (Forrester data).

Those figures are attractive to any company looking to expand globally. However, before considering selling internationally, companies should weigh up the benefits of moving into an emerging market, with the risks, which can be enormous, if not managed correctly.

Every Advantage Brings Exposure to Risk

Anything with potential for enormous financial gains is high risk, and analysing the risk and finding the best path forward is where a trusted partner with local knowledge is invaluable.

To successfully launch into an emerging market, companies must understand the local culture, its nuances and its etiquette. 

In China, for example, there are limitations on foreign businesses and ownership and the practice of Guanxi (building trust through established network contacts) is ingrained. Chinese culture is fundamentally embedded with a doctrine of conflict avoidance, so businesses that go in with all guns blazing and no established network will not fare well.

Emerging economies have often been oppressed, and can mistrust foreign companies, or be reticent to do business with them. Those markets may also have complex corporate structures to undertake trade due to restrictions on foreign ownership.

Research has proven that 75% of cross-border shoppers refuse to buy from retailers who don’t optimise their site to their local language, showing a need for businesses to really adapt to the culture of the given market.

While the rewards are positive for companies who succeed, there are countless failures by companies not considering the more intricate details of their chosen market. 

Why Consider an Emerging Market? The Benefits.

Most companies enter emerging markets for the prospect of high returns.  There's an opportunity to be a trailblazer in an emerging market and have distinct advantages over subsequent competitors. 

Diversification is also a great impetus to global expansion into an emerging market. Economic downturns in more established markets don't necessarily follow in emerging markets. Businesses can offset losses in one region, with the growth in another. 

For businesses relying on the manufacturing of products, an emerging market may prove more cost-effective, with cheaper labour and materials costs.

With large mobile internet penetration, and bricks and mortar retail still underdeveloped, there are exceptional e-commerce opportunities across all socio-economic demographics. 

According to Business Insider, up to 30 million people across South East Asia alone have smartphones, with 200 million having some sort of internet access – and that number will triple by 2025. Carry those figures across all emerging markets and international growth becomes a very appealing proposition for any business. 

With data, automation and machine learning becoming more sophisticated, businesses will find it easier to optimise marketing strategies to capture this enormous group of potential customers. 

Top Considerations.

Before going full speed ahead with international expansion into an emerging market, a business needs to assess if they are truly ready for the transition and if there is the appetite for the product or service in a given market, then develop a thorough plan.

Some key considerations include:

- An evaluation of your product's export potential

- A financial analysis - Can you afford to go global?

- Identifying key markets for your product and completing a competitive analysis

- Logistic solutions and distribution networks

- Cultural considerations and language barriers

- Buying habits of the chosen market

- Technology maturity in the region - are their impediments? 

- Competitive  pricing structure and/or unique selling point

- Investigating export prices and tariffs, payment terms, tax and legislative requirements

- Payment options and processing fees

As a global independent agency,  eWave partners with the world's leading organisations, helping them thrive in new markets. Our team comprises of the industry's top professionals, all with hands-on experience in multiple markets. We provide end-to-end strategy, consulting, technical and creative expertise, to fuel our clients' growth at speed and scale.

If you're interested in learning more about international growth, please get in touch today.

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Aug 23, 2019