Globalization is one of the most critical challenges business leaders face today. But while it's a challenge, globalization offers a superabundance of opportunities. Our 100% customizable Emerging Markets deck eases your efforts to analyze all pitfalls and benefits associated with foreign economies and decide whether or not now is the time to enter an emerging market.
With this slide, list all threats that emerging markets may pose. These may include: foreign exchange rate risk, non-normal distributions, lax insider trading, restrictions, lack of liquidity, difficulty raising capital and more.
Use this slide to apply PESTEL Analysis to your emerging markets evaluation. PESTEL Analysis is a tool used to analyze and track the macro-environmental factors that may impact a venture's performance.
To know whether or not you are going to go after an emerging market, it is critical to determine its Gross Domestic Product (GDP). GDP provides information about the size of the country's economy and, most importantly, the economy's health.
According to a financial services company, Charles Schwab Corporation, emerging markets are countries undergoing rapid economic growth and industrialization. These countries, Charles Schwab website states, make up 59% of the world's population and 40% of the world's economic output. Also, it's worth mentioning that per the April 2019 International Monetary Fund (IMF) estimate, emerging market economies are expected to grow faster than developed economies, at 4.8% in 2020, compared to 3.6% for their developed peers.
Professors at Harvard Business School, Tarun Khanna and Ross Graham Walker, recommend the following three approaches to strategy analyses for emerging markets:
Adapt your Current stratedies
To succeed, the scholars say, business models need to be tailored to each new nation's particularities. "[Business leaders] may have to adapt to the voids in a country's product markets, its input markets, or both. But companies must retain their core business propositions even as they adapt their business models. If they make shifts that are too radical, these firms will lose their advantages of global scale and global branding," Khanna and Graham Walker write in their article for "Harvard Business Review" ("HBR").
change the contexts
Alter the contexts in which you operate, as the products or services your venture offers can force dramatic changes in local markets. For example, when Asia's first satellite TV channel, Hong Kong-based "STAR," rolled out in 1991, it transformed the Indian marketplace in several ways, Khanna and Graham Walker write. According to them, "not only did the company cause the Indian government to lose its monopoly on television broadcasts overnight, but it also led to a booming TV-manufacturing industry and the launch of several other satellite-based channels aimed at Indian audiences."
In some cases, going after emerging markets might be risky and irrational. Home Depot, for instance, has always been careful about entering developing countries' markets. The scholars explain: "The company offers a specific value proposition to customers: low prices, great service and good quality. To pull that off, it relies on a variety of U.S.-specific institutions. It depends on the U.S. highways and logistical management systems to minimize the amount of inventory it has to carry in its large, warehouse-style stores."
They continue: "It relies on employee stock ownership to motivate shop-level workers to render top-notch service. And its value proposition takes advantage of the fact that high labor costs in the United States encourage homeowners to engage in do-it-yourself projects."
One key factor to keep in mind when analyzing emerging markets is the localization strategy. Localization is very specific and tricky, but you can learn from the brands that are killing it in the global arena.
In the past few years, the Uniqlo clothing brand opened over 1,500 stores worldwide. According to Shutterstock, the company's secret lies in the fact that it takes creating content for its social media for the varied, growing markets worldwide very seriously. Thus, Uniqlo localizes its Facebook pages by country, which then allows for simple customization of the content they promote by region. "If the marketing team needs to spread the word about a promo on winter coats in Australia while running ads for its new line of summer dresses in Macau, it's easy to run that localized content simultaneously," Shutterstock notes.
In 2017, Netflix was available in over 190 countries, which is mind-blowing, considering that in 2015, the video-streaming services operated in only 50 countries. Per "HBR," Netflix, "[must have] secured content deals region by region, and sometimes country by country. It also [must have] faced a diverse set of national regulatory restrictions, such as those that limit what content can be made available in local markets."
To satisfy its ambition for global expansion, Shutterstock writes, Netflix had to launch an impressive localization program for the local-language programming curation and content for viewers in different countries. This move required the strategic release of programming with localized subtitles, local languages and dubbing. And recently, Netflix started creating original programming in 17 different markets, which helps not only promote content to the local customer base but also attract new audiences globally.