In today’s globalized world determining how and where to expand is difficult. As national incomes rise around the world countries like The Philippines, Indonesia, Vietnam, Pakistan and Egypt start becoming very attractive. This blog series will explore 4 keys to ensuring speed and success when entering these new emerging markets. Be sure to check back next week for the second blog in this series.
Speed and precision are two factors that are crucial in ensuring comparative advantages in new markets. However, the two need to be balanced correctly. Entering a market too quickly without precision may be the downfall of many companies in foreign markets. Many firms believe being first in the market is key. In some cases, this is true. These so-called first-mover advantages include the ability to set-up supply chains, create a foreign reputation and set up economic moats. However, in most cases being the second mover is more beneficial. Companies can learn from first mover mistakes and save pioneering costs.
However, companies must remember that speed isn’t everything. To ensure precision, companies should figure out the most efficient and effective way to
enter a market by researching a target country’s economic, social and political landscape. In the chemical industry this means researching regulations, standards, and quality that must be met. Many times this process takes as little as three to four weeks and can save a company both time and money in the
future. Next, management should consider joint ventures. Companies can use the already established supply chains, business relationships, and market know-how to quickly establish themselves in the region.
To ensure the foreign operation is managed correctly consider relocating senior managers that have experience in this region. At minimum, seek local experts. These experts will have prior business relationships in the area and will be able foster new business relationships. In the chemical industry, this can be especially important to ensure all regulations are followed. Finally, companies should try to let go of the corporate reins. This might be very challenging for some companies, however management must remember that subsidiary’s need to interact with new customers and suppliers at the local level and need to adapt to cultural differences.
Have you used set-up a joint venture in emerging markets? What have been the advantages and disadvantages? Share your thoughts and stories below.
Check back next week when we will look at how to decide which level of local adaption is right for your company.
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