First a caveat … emerging markets is a catch-all phrase to describe developing countries. It was coined by Antoine van Agtmael in the early 1980’s to replace the more negative term “third world country.” It is supposed to designate those countries in a transitional phase between developing and developed status.
But here’s the rub … China is considered an emerging market. But I wouldn’t call Shanghai or Beijing an emerging market because income levels, as well as PC, internet and mobile phone penetration are approaching levels found in developed countries. But a significant area of the country, specifically the 800 million or so people in rural towns and villages, would truly be considered an “emerging market.”
A company therefore needs a multi-tiered approach when targeting their product, market and business development strategies within an emerging market country, especially larger markets like the BRIC countries (Brazil, Russia, India and China). For example, at Intel we created five city tiers segmented by various demographics for China.
So with that caveat aside, any approach to growing a business in an emerging market country needs to consider these 10 guiding principles when introducing new products or competing against established players.
- Engage the government early. Hire ex-politicians, lobbyists or government consultants who already have contacts in key ministries.
- Develop your channel and distribution strategy, picking a few partners initially and scaling out over time.
- Find critical, complementary partners to co-brand/co-market to increase scale.
- Localize marketing campaigns and where possible tap into national pride.
- Start brand-building early and focus on creating “aspirational” brands.
- Offer affordable pricing … customers are more price-conscious, but will pay more for aspirational brands (e.g. #5).
- Invest in local labs and/or R&D centers … this can be key for increased government support.
- Evaluate alternative business models for packaging, selling, distributing, financing and servicing your products and services. What works in developed markets (e.g. Dell’s direct-model) does not necessarily work in emerging markets (e.g. retail PC stores prevail).
- Products sold in mature markets need to be evaluated and modified as needed. Setup a feedback/research mechanism for field and local-on-the-ground personnel to communicate with product divisions.
- Start and think small initially. Do a pilot. Incubate. Experiment in defined regions and/or segments. Begin strategizing ways to scale initial offerings.
In general, these principles are common amongst all emerging market countries. But each country has different aspects that must be considered. For example, China is a very unique and complicated market which I have created a separate top 10 list for here.