Tuesday, April 26, 2016

Strategies That Fit Emerging Markets - 'The Indian Market'

Tapping into a foreign market can be very tricky and challenging, especially when it is an emerging market in the developing countries. If a firm wants to develop a strategy to enter an emerging market, it must first try and evaluate three questions. 1) Why do you want to enter a foreign market? 2) Are you financially able to handle risks? 3) Why do you believe the company will succeed in an emerging market? Harvey James, an assistant professor of economics at the University of Hartford, says that answers to these questions are key to any company embarking into an emerging foreign market. "If you want to enter a market because you think everybody is doing it, you will likely fail," he says. "If, however, you are convinced that there is a market for your product or service in India, Brazil, China, or any other emerging country, you have a better chance of succeeding." Companies that choose new markets systematically often use tools like country portfolio analysis and political risk assessment. The best way to take a decision on which strategy to analyze (that work and that don’t) the five contexts framework. It essentially helps the executives of a company map the institutional contexts for any country. The five contexts are a country's political and social systems, its degree of openness, its product markets, its labor markets, and its capital markets. Using these institutional contexts, let’s try to analyze the Indian market. Since the adoption of the economic liberalization in 1991, India has grown to become a USD 1.3 trillion economy, with a diversified industrial, agricultural, financial and services sector. India’s burgeoning middle class has been one of the major attraction points for the foreign companies, owing to its high purchasing power. The ecosystem has shown greater acceptance of western culture, lifestyles and products, and strong demographic advantages – which will continue to fuel India’s growth in years to come. With its large pool of technical talent and manpower – it has provided opportunities for industries to deploy technical talent on a large scale. Multinationals, unlike in China and Russia, can count on local partners’ internal systems to protect their interests and assets, and their intellectual property. However, due to its regional diversity, large rural-urban divide, dominant unorganized markets and multiple legal and administrative systems – foreign companies face formidable challenges in conducting their business. Furthermore, a complex bureaucracy and lack of proper infrastructure facilities magnify these challenges. According to me the biggest challenge that most multinational companies face is the Indian governance framework, which is intertwined between the Central and State structures.  Therefore, it is extremely important for the companies who want to venture into the Indian market, to develop strategies that would help them to overcome the challenges. To succeed companies need to adapt their strategies and business models that better fit the Indian market. They will have to change the contexts – that will help countries develop their potential and sometimes choose to stay away and not invest in the market.

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