Emerging Market Strategies: Location

By M. Isi Eromosele

Your emerging market strategy starts and perhaps ends with the decision of where to locate your enterprise. This crucial decision needs to be aligned with the strategy and not the target country’s ranking in world indicators.

To succeed in emerging markets, companies need to stay competitive and improve their products as well as speed to market. They must align their strategic objectives with their capabilities as well as the market potential of the country location that is to be chosen.

The emerging markets location options available to global companies who want to expand has widened in recent years. India and China had been the preferred venues for many years. They were the logical choice for low-complexity work. Although operating costs has been rising in these markets, their manufacturing capabilities have also been transformed for the better.

China has demonstrated its ability to leverage its ability in low-end manufacturing to become a major producer of sophisticated, high-end goods. Other countries such as India and Thailand are being chosen to expand high-end manufacturing operations.

As China’s growth in high-end manufacturing continues, supplier networks from surrounding countries are becoming centers for low-cost sourcing.

The above destinations are no longer the only options available for strategic global market expansion. Companies need to focus their global expansion plans on other emerging markets that better address specific challenges and complexities of the global market.

Companies seeking competitive advantages can find them in Eastern Europe, which boasts low cost labor, shorter lead times and attractive tax incentives to manufacturers. Likewise, Latin America, Russia and a host of Asian countries are emerging as attractive options for global market expansion.

Some high growth emerging economies offer considerable opportunities for revenue growth in their local markets. Many companies are establishing their business and manufacturing operations in markets such as Brazil and Russia.

Additionally, companies with manufacturing bases in these markets are establishing Research and Development units to develop and localize new market products.

Companies choose multiple locations for product development and manufacturing to reduce development time and access a wider pool of local talent. They diversify by spreading their investments across geographies.

As the number of plausible emerging markets grows, companies should give careful consideration to business success factors such as capability, capacity and risk. These factors can be crucial in choosing the right country in the right region.

Experience is another critical factor that comes into play when entering emerging markets. Companies with more experience tend to do a better job of extending their value chains in emerging markets because they have deeper business relationships and great knowledge of local markets and cultures.

Companies with less experience can still enter emerging markets by taking advantage of burgeoning market opportunities in the Eastern and Asian hemispheres.

Companies can also enter emerging markets to take advantage of newfound financial benefits. Many emerging countries are opening up to trading with the West, reducing tariffs, which in effect attracts greater volume of work from developed countries.

For example, Morocco established itself as an export gateway by entering a Free Trade Agreement with the United States, European Union and several other countries, including Tunisia, Egypt, Jordan and Turkey.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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