Since early 1990’s globalization has been the trend in international business. International travel and communication has increased due to rapid technological developments. Many professionals and companies have risen up to participate in international trade and investment. Similarly, the number of businesses that operate across borders has increased. Many companies especially in the triad economies of the US, Europe and Japan have realized that concentrating in domestic markets only leads to stagnant sales and profits. Chinese companies are the latest to adopt that practice.
They have therefore sought to venture into emerging markets especially in Asia, South America and parts of Africa. The element of cheap labor available in these countries and the expanded market opportunities have ensure good profit margins for these companies. Any serious corporate therefore that does not have a strategy for cross border trade does not belong to the 21st century mode of doing business. Many companies adopt different strategies when going regional or multinational market needs. Some do opt to form partnerships in the destination market while others acquire companies of the same business and just do re-branding.
Other companies decide to start from scratch in new markets by designing new products suited for that population, marketing then, and cultivating a niche for themselves. American companies have been setting shop in china for quite some time now and they are the best example of companies that have adopted their global brands to meet regional markets. Google for instance has rolled out its search engine business in nearly every country in the local language therefore making it easy for people to use its service wherever they are without the language barrier.
What cultural and economic issues might a large European retailer expect to face when entering emerging markets? Discuss using examples to illustrate your answers.
Emerging markets are attractive to companies for the sole reason they are not fully exploited hence not fully saturated. However, there are a myriad of economic issues that will be at play for any company that is venturing into the emerging markets.
However, many of the governments of emerging markets are opening up their economies and adopting free market policies, there is considerable amount of government control. The controls may touch on various aspects of a company’s core business and the outcome in terms of market penetration and revenue uptake may not add up. Countries like China have strict laws that infringe privacy of both companies and people. As a result, companies that are not able to play by the government rules close business like Google.
There are also cultural issues where some sections of the population may not be allowed to own or use goods or carry out some activities by themselves or at all. In the Middle East for instance, women cannot go out shopping unaccompanied while in some cultures, the use of mobile phones and other expensive gadgetry is considered men business hence companies that deal in that should be prepared to factor such instances in their strategies.
In some countries, matters to do with the environment are important and they come first before anything else. For instance, there is s case on point where Hyundai wanted to set up a factory in India but the state governor for that state did everything to block the development because it could have resulted to irreversible environmental damage. The governor of Gujarat who is pro-business then invited Hyundai to the State and the company was able to pull through its plan. Such issues exist and it is only prudent that retailers are venturing to emerging markets; a good background study is done.
Due to the increased interest in the merging markets, more companies are doing market research with the aim of entering these new frontiers. Many market research raise different results and reports. Different results that may not rhyme at times may paint un-clear picture for the new business on new markets. Given that these studies done on the populations of the prospective markets, and considering many that have been done before, the populations may take them for granted hence the outcomes may be misleading for the companies wanting to do business. Some populations in these countries are quite remote and cannot participate in the research while they may actually be potential customers for the goods on offer.
Competitors present in the emerging markets may also deliberately mislead the new businesses with the aim of containing them on the face of the anticipated competition. It is therefore important for these companies to ensure research is done professionally and by credible organizations so that they can scheme properly after seeing the clear picture on the ground.