Despite High Growth Expectations in Emerging Markets, Issues Remain

Michelle Remo, “Big 4″ observer
November 09, 2011 /

While many companies generated revenues from emerging markets in the past year, 31 percent report that revenues from them fell short of goals during the same period, a new Deloitte survey showed.

The focus on emerging markets to fuel growth continues to intensify but success has been mixed, Deloitte noted.

“There is no ‘one-size-fits-all’ solution for companies looking to achieve success in emerging markets,” said David Martin, principal, Deloitte Consulting LLP and U.S. emerging market growth strategies leader.

“Consumers in emerging markets are increasingly sophisticated–they know if a product or service is simply a cheaper version with inferior attributes. Offering a lower-priced product or service matters in emerging markets, but it requires customer insight and corporate ability to address unique hurdles in each of those markets,” Martin added.

Forty-three percent of respondents said providing products and services at affordable prices that meet customer needs has been a challenge to increasing revenues in emerging markets, 40 percent said it is competition from local businesses, another 40 percent pointed to brand awareness in the market, and 39 percent said it is navigating protectionist policies and government bureaucracy.

“Introducing a new product that responds to customer needs while educating customers and their governments about the offering is complex,” said Simon McLain, also with the Deloitte emerging market growth strategies practice.

“To increase the likelihood of long-term success, executives should customize their strategies to meet the specific demands of each country, even regions within a country. It’s time to stop focusing on emerging markets as a group and start focusing on specific countries individually,” McLain said.

Companies surveyed with current emerging markets operations say successful strategies to generate revenues include the use of local sales/service support centers (62 percent); employing company-owned sales and/or distribution (60 percent); designing products/services specifically for the country or region (60 percent); offering a different value proposition for customers/consumers (59 percent); and employing a company-owned supply chain (56 percent).

“Putting operations on the ground where you plan to expand and learning the regulatory and cultural nuances of each country will help you serve your customers better. Emerging market success is typically greatly compromised when companies don’t focus on those crucial steps to market entry,” Martin said.

 

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