Seizing Emerging Market Opportunities

Emerging market companies have many reasons to seek out new opportunities. Pent up demand, lower cost labor and growth rates are the obvious attractions.

But cultural specificities, institutional voids and informality, in-transparent business networks, industrial structures and other barriers render standard western marketing thinking inadequate in emerging markets. To succeed in these frontier markets, a company needs enterprise capabilities that create value and are difficult to copy.

Sustainability

As the world becomes more aware of the need to tackle climate change, existing regulations and customer expectations present business leaders with new requirements that impact bottom lines and market access. These changes also provide new opportunities for businesses to become a catalyst for sustainable development in emerging and frontier markets.

Cultural specificities, a lack of data, hidden players and in-transparent business networks render standard western marketing thinking inadequate when it comes to developing successful strategies for emerging markets. To get ahead, marketers need to focus on opportunity-seizing capability—the ability to transform what they find into products that customers want and need.

Reckitt Benckiser’s new model outlines four ways brands can nurture growth through sustainability, including fertilizing, in which a company stays in its current playing field and adds a sustainability “nutrient;” transplanting, in which the brand serves new needs by extending existing offerings into adjacent markets; grafting, whereby the firm asks customers to participate in its sustainability efforts; and hybridizing, in which the firm adopts a fresh sustainability purpose and completely repositions itself in the marketplace.

China’s shift from growth to reliance on domestic consumption

As China’s economic growth slows, it must rebalance its economy. Investment and exports are declining, and China’s consumption of goods and services is growing faster. Domestic demand is the key to sustainable growth, and China’s middle class is eager to spend.

China’s household deposits have increased by a tenth of GDP over the past three years. Domestic tourism revenues rose by 30% this year and movie theater takings during the Spring Festival were up. And, sales of premium home appliances such as robot vacuum cleaners, giant TVs and dishwashers are booming on e-commerce platforms JD and Suning.

Xi has expressed an important commitment to a political rebalancing that reduces the deflationary and socially destructive export-and-investment model. That will require stable growth in disposable incomes and a social insurance system that opens up new consumption horizons. It will also mean making China less of a net absorber of global demand and more of an engine for growth.

First-mover advantage

The first-mover advantage is a powerful competitive edge that comes from being the first significant company or product to occupy a market segment. The advantage comes from the power of brand recognition and customer loyalty that companies enjoy when they are able to establish a new category in consumers’ minds.

Another first-mover advantage is being able to control resources that are difficult for other entrants to access or replicate. This could include the location of a store (Starbucks), the quality of raw materials used for production, or the ability to gain monopoly control of an industry sector.

However, there are forces that can quickly erase a first-mover advantage. One is market evolution, which can change consumer tastes very rapidly. The other is technological evolution, which can quickly outpace the ability of a first-mover to innovate. It’s important for businesses that seek first-mover advantages to be flexible and adapt their strategies in light of these dynamics.

New business structures

Picking a business structure is one of the most important decisions that a new or growing business must make. This decision impacts everything from how the company is taxed to how much liability it holds for its debts.

A company’s structure also influences its ability to attract investors. Often, investors will only invest in companies with a specific structure, so it is important to pick the right one from the start.

The rapid development of emerging economies is attracting Western businesses. These businesses are looking to capitalize on the high growth rates and pent-up demand of developing markets. However, these businesses are facing significant challenges.

The ability to seize opportunities is critical for a company’s success in a changing environment. This ability is referred to as opportunity-seizing capability (OSC). OSC positively affects new market development in an uncertain environment. It enables SMEs to identify and select opportunities that are compatible with their current business models, thus maintaining their strategic competitive advantage.