Emerging Market For Business Growth
Every businessperson wants to grow their company. There are many strategies to choose from, including product expansions, asset acquisition, and even partnerships. But this article will focus on one business growth approach, emerging markets.
First of all, what are they? In general, emerging markets are markets from developing nations that have only started to engage in the global market.
As such, developing nations have characteristics that companies should watch out for if they want to venture into their market.
Rapid Economic Growth
One such example is that an emerging market has rapid economic growth, which could even surpass the growth rates of developed countries. They can also offer great returns due to their substantial and rapid growth. Also, the generally low cost of production due to them not being a developed nation provides significant incentives for businesses that want to grow in that country.
Middle-Class Growth
In emerging markets, the substantial middle-class demographic plays a vital role as consumers and the workforce. Their presence is instrumental in driving the growth and stability of these transitioning economies.
Young Population
In emerging markets, the substantial middle-class demographic plays a vital role as consumers and the workforce. Their presence is instrumental in driving the growth and stability of these transitioning economies.
The characteristics above show common factors in an emerging market, but even then, why are emerging markets important for a business?
Increase Of Consumers
Expanding a company using emerging markets offers the advantage of significant consumer growth. Developing nations are transitioning to having good buying power among their citizens. With good buying power and an increase in the middle-class, more people can buy a company’s product, much more once a business can successfully establish itself in this new market. The possibilities are endless for emerging markets.
A Head Start
Companies from a developed nation have the capabilities for a headstart among their competitors. The faster they can establish their presence, the more research, time, and resources they can exert into solidifying their branding in the emerging market.
In some cases, companies can even dominate an entire industry in emerging markets with little to no competition.
Diversification of Investments
A country’s economy fluctuates, and inevitably, economic downturns happen. Therefore, emerging markets provide an excellent medium to diversify a company’s business growth.
Talent Pool Increase
An emerging market has an increase in good education among its citizens. This factor gives rise to the labor force being capable and adept in their skillset, providing a company with a significant talent pool. If the company has dominated its respective industry, it effectively employs the best individuals within their field.
Great Relationship with International Trade
The rapid growth of emerging markets also correlates with the alliances and relationships they have formed globally. A company’s business growth can take advantage of this fact and use the targeted country’s trading relation to reach the local stage and their trading partners.
While there are numerous advantages to business growth in emerging markets, it is essential to acknowledge the significant risks involved.
Economic Instability
Even though one benefit of emerging markets is diversification, it is still not at par with a developed nation. Therefore, a downside of business growth via emerging markets is the various risks within the country. There are many factors to recognize, from the political climate, bureaucracy, corruption, and infrastructure deficiencies. These are only some, but it presents that a company needs due diligence before picking a particular market.
Currency Volatility
When a company establishes itself in an emerging market, the funds earned are usually in the local currency. This exposes the business to currency fluctuations, which can affect its returns. Additionally, converting the local currency may present challenges, particularly in depreciation.
Liquidity Risk
An undeveloped regulatory framework presents the dangers of difficulty in liquidizing an asset and exiting positions. This is a risk that may cause companies to buy and sell securities harder than before.
Research, research, and research
Settling in a new market is daunting, but researching key areas such as the target audiences, demographics, culture, and many more removes the local barrier to penetrating their market.
Take an Introspective Look at The Company
Merely researching the local market is insufficient if a business does not align with the market dynamics. Companies must analyze their products and services to ensure they can thrive in the emerging market. If necessary, adapting services or offering additional options can be effective strategies to attract customers.
Analyze Competition
Finally, one of the best ways to understand the local scene is by looking at what is already there. Competitors provide valuable data that can aid any business by looking at how they stand out from the rest.
Venturing into emerging markets can be a make-or-break scenario for businesses. Despite the opportunities they offer, it is not without risks. However, conducting strategies such as thorough research and analyzing competitors can help mitigate these risks. Ultimately, it is up to businesses to navigate and adapt to the unique dynamics of the emerging market.
Global People is a leading local employment solutions provider for national and international corporations and can advise and escort you in your next destination.
