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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.
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