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Taking Advantage of Emerging Market Opportunities

By March 8, 2019 No Comments
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When Gillette wanted to expand into an emerging market, it developed two types of razors specifically for its target country, India. Both products went through a lengthy design and testing process, resulting in the spectacular success of one and obvious failure of the other. This story serves to illustrate both the opportunities and challenges involved when taking advantage of emerging market opportunities.

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Defining Emerging Markets

Like Gillette, companies that hope to capitalize on emerging market opportunities during a global expansion need to begin by identifying the market with the most potential for success. To do that, they first need to understand what constitutes an emerging market. First coined in 1981, emerging markets, or emerging market economies, are nations whose economy is growing to become more advanced, but are not yet classified as a developed country.

The five key characteristics that define emerging markets are:

  • Less-than-average per capita income
  • Recent rapid growth
  • High market volatility
  • Less mature capital markets
  • Higher-than-average return for investors

These five defining factors all work together to establish an economy as an emerging market. For instance, less-than-average per capita income incentivizes countries to undergo rapid changes in order to fuel economic growth and build a more mature capital market.

Finding Emerging Market Opportunities

Once companies understand emerging markets, then they can determine which emerging market is right for their global growth goals.

The 2018 Morgan Stanley Emerging Market Index lists the following 24 countries as emerging markets: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and the United Arab Emirates.

Countries like India, China, Brazil, and South Africa are among the most famous emerging markets, but each nation presents its own unique benefits and challenges for companies willing to take the leap and explore these emerging market opportunities.

Emerging Markets Opportunities and Challenges

As emerging markets progress, they often experience the rapid income growth they set out to create. As more people within a country rise out of poverty, a consumer class develops that leads to a marketplace full of consumers who are hungry for new products and services. With the right offering combined with a strategically chosen market, a company can expect to grow their revenue at a steady rate in the right market.

In addition, emerging markets have begun to drive global innovation. More and more, companies are discovering that emerging markets allow them to innovate at a lower cost, but with the potential to disrupt the status quo. It is important for companies to keep in mind that if they hope to fuel innovation in emerging markets they need to be aware of the potential pitfalls other businesses have faced, such as pricing product or service offerings competitively and positioning their offering correctly in order to attract their audience.

The potential for growth in emerging markets comes with its own set of risks. While most emerging markets have begun reforming their political, legal, and financial systems, challenges still remain. Many countries still do not clearly protect property rights, have a culture of corruption, pass laws designed to impede trade, and have a weak financial infrastructure. If companies are not aware of these potential challenges, they may not see the success they hope to in emerging markets.

Trends in Emerging Markets: Know the Market

Sometimes the biggest challenge for companies expanding into emerging markets is understanding the local culture, market, and expectations. Because emerging markets can be so complex, companies can benefit from creating detailed plans and products tailored to a specific market. This can be done by taking the time to observe consumer habits and local customs present in a company’s desired market.

When Gillette looked to bring its business to India, it noticed that over 500 million men used T-razors. These razors cost only pennies for consumers but were prone to causing cuts and nicks on the men’s faces. Following this discovery, Gillette made a plan to create an inexpensive razor to solve the issue presented by T-razors, while appealing to these men.

In 2002, Gillette developed the Vector razor. Designed to protect faces, this product included a sliding bar to unclog the razor from coarse hair. Gillette then invited Indian students who lived in Boston to test the razors, and they loved the concept. However, when the Vector was released in India, it bombed. The reason? The sliding bar required running water to work, and most Indian men did not have access to indoor plumbing.

Learning from its mistakes, Gillette sent executives to India to observe 1,000 different men for over 3,000 hours, asking them about their shaving habits. Through this, Gillette discovered that Indian men had different shaving priorities than western men. In the West, men are focused on getting a close shave, whereas Indian men were chiefly concerned with not cutting themselves while shaving. Developers then produced a razor called Guard that could work without running water, was inexpensive and made shaving less dangerous. This razor soon became the fastest growing product in India for Gillette’s parent company, Proctor and Gamble.

Bringing a Business into Emerging Markets

Understanding the culture, expectations, and priorities of customers within a country is key when taking a business into emerging markets. Companies can grow rapidly by taking advantage of emerging market opportunities, but they must proceed carefully. Because emerging markets have volatile political, legal, financial, and cultural climates, risks are high for companies that enter a market unprepared. When looking to enter unknown foreign markets, companies can benefit from utilizing an International PEO (Professional Employer Organization) solution. This employment method allows companies to maintain an agile approach when entering emerging markets and stay flexible in order to adapt to the rapidly changing marketplace. In addition, International PEO makes it easier for companies to exit a country if they do not realize the opportunities they expected in emerging markets.

By taking the extra time to learn the cultural nuances in a market and following Gillette’s example, companies can expect a better experience when expanding into emerging markets.

Take advantage of emerging market opportunities by reaching out to our team of experts today to learn how our International PEO solution can have you in your new market in as few as 48 hours.

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