Strategies That Fit Emerging Markets

Strategies That Fit Emerging Markets

In the case study article of Strategies that fit emerging markets written by Tarun, Krishna and Jayant, there are five points illustrated to state the important factors for multinational companies to form successful strategies to enter into emerging markets:

 Political and social systems: like power distribution among city, state and central governments; whether there is independent judiciary; whether private property rights protected by law

 Openness: foreign investments restrictions; new venture procedures

 Product markets: available market data; quality of supply chain; transportation infrastructures

 Labor markets: quality of labor; cost of labor

 Capital markets: effectiveness of financing systems; transparent corporate performance information

All the above are very important factors to consider entering into emerging markets, however, to be succeed in doing business in emerging markets, in my opinion, there are some more critical points to consider.

Before we consider the critical factors to consider, let’s discuss some fundamental questions.

 Why should multinational companies enter into emerging markets?

 What are the success factors to win in emerging markets?

Why should multinational companies enter into emerging markets?

In general, I think there are two important reasons triggering multinational companies which have operated well in developed countries to enter into emerging markets. First, the addressable market for its business has been fully or almost utilized in developed countries. Second, there are something can be leveraged to succeed in entering into emerging markets. Both of the two factors are required to be met before entering into emerging markets.

For the first factor, simply speaking, we need to think about whether the current market potential has been fully achieved. If yes, then it means that it is very difficult to grow in the current market. For example, steel industry in US has no growth potential. For US steel manufacturer, if you want to grow, you need to tap into other markets, like China, Brazil or other developing markets which still have growth potential in steel industry. There are also opposite example for this argument. When Warren Buffet was interviewed by people what is his strategy to doing investment in emerging markets, he addressed that although emerging markets definitely have plenty of investment opportunities, he also did some investments before, like Petro China, he would still focus on US market, as in his opinion, US market also