Emerging Markets, Emerging ClarityBy David Martin |
David Martin
Principal, Deloitte
Consulting LLP
Back when companies first started making the move to emerging markets, it seemed like they could hardly make a wrong move. After all, with such low entry costs and limited competition, the stakes were relatively low. And with huge markets in play, the upside was considerable. A lot of people looked brilliant after pushing their companies into emerging markets.
Today it’s a slightly different story. The potential is still huge, as these growing countries become more prosperous. But competition is on the rise—along with the costs associated with establishing operations in these markets. Those are some of the reasons why 35 percent of companies failed to meet their revenue goals in emerging markets over the last three years[1]. The low-hanging fruit may be mostly picked over, but for many companies, the call of emerging markets is still irresistible.
The good news is that by now, many companies have already learned the hard lessons through their experiences in emerging markets. To find out what they’ve learned, we commissioned a survey of nearly 400 executives working at companies that generate revenues from one of 10 key emerging markets. Here are some key insights from those findings.
- Maturity affects the geography of opportunity. Among 10 leading emerging markets, executives surveyed were most likely to expect revenue increases of 25 percent or more over the next three years in the expected places: Brazil, India, and China. But for companies without an existing presence, Eastern Europe, Russia, Southeast Asia, Mexico, and Central and South America are seen to present among the greatest opportunities
- Bigger company, bigger momentum. According to respondents whose companies had revenues of $5 billion or greater, they are more likely to have exceeded their sales revenue goals in emerging markets over the last three years, while small companies (less than $500 million in revenue) were the least likely to have done so.
- Go local. Companies that had company-owned operations in at least five of six major emerging markets were much more likely to have exceeded their revenue goals. In addition, some effective strategies were using local sales/service centers, employing company-owned sales and distribution, and employing a company-owned supply chain. Local operations may provide advantages such as greater knowledge of customer needs and buying habits, greater brand awareness in the market, and more experience in navigating government approvals and procedures
- Know your customer. Designing products specifically for customers in the local market and offering a different value proposition were considered among the most effective strategies. When it came to challenges identified by survey participants, one of the top challenges in five of the six emerging markets studied was to provide products/services that meet customer needs at prices they can afford
Emerging markets are dynamic, exciting, and loaded with potential. No matter where you are in your journey, make sure you learn from the experiences of others. Because not only are the opportunities real, but the stakes are higher
[1] Source: Deloitte survey. “Emerging Market growth expectations are high, but misconceptions and disappointments linger” (2011)
A Response from an Industry Leader
Simon McLain
Senior Manager at
Deloitte Consulting,
LLP
RE: Emerging Markets
Very interesting. For me, this is a great argument for building momentum early when considering expanding into new markets. Those that were able to solidify their presence in China, India and Brazil early on are enjoying the benefits today. How long will it take before these newer markets (such as Eastern Europe and Central America) become entrenched with competitors and prohibitive costs.
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