The Business Of Doing Business In Emerging Markets

The emerging world has witnessed growth rates that far exceed those of the developed world. Clearly the global balance is shifting in their favor. While many people have previously forecasted this shift, two recent trends appear to have added strength to this prediction: the BRIC (Brazil, Russia, India and China) economies have had impact sooner than expected and China and India are dominating the BRIC story.

Executives worldwide are responding aggressively to this changing market dynamic. An Accenture study of CXOs across Europe and the United States (2006) identified globalization as one of the key planks of corporate strategy in the 21st century. The term “globalization” has come to imply far more than far-ranging export activity or overseas research centers. Increasingly, it is associated with core revenue-building activities such as sales, marketing and manufacturing.

An Accenture study of C-level executives in communication and high-tech companies reveals that customer-facing roles are the most important in the corporate globalization effort. For companies to succeed in such roles, it is imperative that business leaders understand the sales context in these markets.

As customer-facing roles become more important, more is expected of sales organizations. However, the selling process in emerging markets often differs markedly from the sales methods typical in the developed world. Four factors are relevant:

• business environments are not yet mature - immaturity of these business environments makes it challenging to do business successfully;

• growth rates can skew goals - customer retention can take a back seat while all the focus shifts to acquiring new customers;

• there are a myriad of low-income buyers and small businesses that offer huge potential but are often geographically dispersed (and thus difficult to reach); and

• there are markets within markets within markets - to serve large, diverse markets such as China and India, a broad-based sales network is necessary.

The answers to these challenges depend on many internal and external factors but we have found several underlying themes common to most successful companies:

• emerging markets tend to require an operating style that is personal rather than process driven;

Additional, even superfluous manpower may bring about the “personal touch” that produces the extra dollar of profit. A strong collaborative approach is also seen in the way that corporations deal with competition or develop and leverage strong local networks.

• they select the sales channels that suit each market best;

Corporations often struggle to find the right balance between direct and indirect routes to market. Establishing a direct sales organization demonstrates a company’s commitment level to governments and to large corporations in emerging markets. Customers also tend to want to receive service from the company itself rather than partners.

However, setting up a direct sales force to reach an entire market may prove to be quite costly and time consuming. Given the size and dispersed nature of markets such as India and China, leveraging indirect channels is often the most cost-effective and timely way to reach large numbers of customers.

• they find smart ways to reach low-income customers;

Companies need to develop solutions that appeal to low-income customers and small businesses in geographically dispersed locations. These solutions may involve developing a strong rural sales structure.

and

• they strive for the right mix of local and global processes.

Experience shows that the most successful answer tends to be a blended approach of local and global processes. We have found the most important areas to “localize” are the distribution channels themselves. Leveraging “global standards” for many of the back office procedures, sales methodologies and supporting technologies, on the other hand, has been proven to be very effective in providing some needed structure and operating efficiencies to these fast-growing markets.

Success in emerging markets is rapidly becoming a critical success factor for global companies. The core challenge is to grow in a cost-effective and profitable way given the vast size of the markets, the differing economic and infrastructure capacities, and the variations in the markets’ cultures and customs.