What are the major opportunities that emerging markets offer to international companies and what are the key considerations that such companies have to take into account when formulating strategies for doing business in emerging markets?

Résumé du document

The notion of an emerging, or developing, market economy appeared 1981 in a World Bank report. This term was used since emerging countries have embarked on economic development and reform programs, and have begun to open up their markets and "emerge" onto the global scene. Therefore emerging markets are fast growing economies and benefit from the globalization of the world market. Emerging markets, especially the "giants" such as China, India, Russia, Mexico and Brazil are changing the face of global economics and politics. Today, roughly thirty countries are considered to be in transition to higher levels of economic development and have hence earned the title "emerging markets" from the International Finance Corporation (IFC) of the World Bank. Companies are increasingly looking to emerging markets as a vital source of growth, both for outsourcing and competing. But these new opportunities are also a source of danger for the industrialized world's company in case of a bad understanding of institutional variations. Because these markets are in transition and hence not stable, investing in Emerging Markets Economies (EME) adds considerable risk to a company's portfolio.

Extraits

[...] As a conclusion, the key is to adapt to local cultures and show courage to overcome all the administrative and human complications; unreliable data, corruption (especially in South America), cultural differences, political and legal risks (contract enforcement more difficult), etc. Once the confidence is there and adaptation to local people and market is accomplished, business in emerging companies will be good as home”. Infrastructural changes A new country changes a lot, infrastructural changes occur a lot, wrought on by the demands of a developing country and/or the direct arrival of new products and cultures (i.e. digital culture, new brands ) Also the emerging markets change on a governmental way, e.g. China or former U.R.S.S. [...]

[...] But because the emerging markets are in transition and hence not stable, risk occurs. It can be a financial risk, a cultural misunderstanding of the market or the business partners, a political and legal risk, a bad evaluation of existing competition, etc. This part tries to assess the most common risks to which exporting companies to emerging markets are exposed and how they can reduce them. The pillars of transformation Deregulation, privatization, Opening up to foreign trade and investment and labor reforms are known as the four pillars of transformation of an developing country to a developed country. [...]

[...] Deregulation is the process of lessening or complete removal of government regulations on an industry, especially concerning the price that firms are allowed to charge and leaving price to be determined by market forces. For instance, Russia has been going through wide-ranging deregulation (and concomitant privatization) efforts since late 1990s. The main thrust of deregulation has been the electricity sector (see Unified Energy System), with railroads and communal utilities tied in the second place. Deregulation of natural gas sector is one of the more frequent demands placed upon Russia by the United States and European Union. [...]

[...] In order to access this information and local resources, it is vital for a company to adapt to the local markets and crave for information. Essilor's and L'Oréal strategy to gain this information and resources will be detailed in the last part. Also, they are specific growing sectors in certain activities, for instance Guangdong footwear cluster in China, or Semi-conductor cluster in Taiwan and Malaysia. Efficiency: achieving lower costs Of course, producing in emerging countries is also a cost matter. [...]

[...] Therefore, some analysis tools are very helpful to not forget to take into account the key considerations to succeed. Business strategies and key considerations According to Hamel and Prahalad, essential elements of success are: the articulation of long-term goals and the formation of a strategic architecture, a network of international competencies and coalition partners enabling the company to control a full range of requisite resources. For instance, it is known that the “Keiretsu” (Network) is vital in the Asian culture; none can make a successful business without being part of a Keiretsu. [...]