Wednesday, April 27, 2016

Strategies That Fit Emerging Markets

Globalization is imminent in today’s world. With companies growing globally, identifying and studying the global markets suited for a company’s expansion has become the basic need of the hour.  The countries where a company chooses to expand is called an emerging market. It is usually meant for expansion and cost cutting. Therefore, most of the emerging markets are the developing countries where the labour is comparatively inexpensive and technologies are not at par. This creates issues in deploying the strategy implemented in the home country at the emerging markets.
The paper, ‘Strategies That Fit Emerging Markets’ is a detailed study of why the strategies fail, what tools can be used to choose suitable emerging markets for a business and discussed the Five context framework in detail. According to the paper, one of the reasons why the strategies fail are the institutional voids. The emerging markets lacking the sophistication in tools, services, operations, etc. create a void that the strategies in home countries fail to address. Also, unavailability of reliable sources to study the market conditions contribute to these failures. So new strategies need to be implemented for every new emerging market that a company wishes to operate in.
The paper suggests a five context framework to analyze the market conditions in the emerging markets.
1.      Political and social systems
Every country has various political as well as social norms that give or restrict its citizens and products from certain privileges. A detailed analysis of the sociopolitical aspect of the country is essential to design the strategy of operation in a given market.
2.      Openness
Every company must design its strategies around the country’s policy to openness. Openness refers to the country’s policy to allow multinational corporations access to its resources and willingness of the company to adopt new ideas.
3.      Product markets
A single reliable source to study the market in terms of customer preferences, etc. does not exist in the emerging markets. This aspect of market is extremely important in strategizing the product portfolio of the businesses as well as in defining the strategy.
4.      Labour markets
There is a possibility that emerging markets may lack skilled labour to handle the advanced tasks and capabilities of the business. Different countries also have different notion of the trainings and quality. Unless this aspect is deeply analyzed, it cannot be presumed from the available data.
5.      Capital markets
Financial decisions must be made only after carefully studying the capital market in various countries. Often the emerging markets lack credit-rating agencies, investment analysts, merchant bankers, or venture capital firms to raise capital.
To study these aspects of emerging markets, probing questions specific to businesses must be framed. Few other tools that maybe used to study markets are Country portfolio analysis, Political risk assessment, Market growth, GDP & Per capita income, Exchange rates, etc. Composite indices also provide ratings to develop businesses in various countries but it leaves out the soft infrastructure ratings and availabilities.

While all these tools can be used to devise strategy, they should not be directly used to make decisions on entering a market. A collaborative study of all the features best helps in analyzing and deciding on the markets as well as strategies.

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