September 28th, 2012
Emerging markets traditionally offer investors the greatest opportunities, and the sheer size of markets like Asia are a lure that many companies cannot and should not resist. However, these markets have different social, economic and political drivers that can result in substantial financial losses before any gains are generated, particularly if you don’t gather enough information before you enter.
Before entering a new market companies should take the time to educate themselves as to the real size of the opportunity, the competitive landscape, the culture, business customs and the biggest risks. For example, in China, often it takes a number of meetings with a prospective business partner to build enough trust for the Chinese side to feel comfortable to move forward with some kind of business relationship. This trust building is typically different in Western business culture where trust is more assumed and given at the early stages of a business relationship.
The first step in entering a new market can be to commission a market research report from an independent firm to get an analysis that is more specific to your business. Industry-wide reports often don’t provide the level of detail that companies need to make an informed decision as to whether the market is right for them. Don’t make the mistake of assuming your existing products, channels and programs can be dropped into a new market. History has shown that many companies that cross over into a new market using the same products, people, channels, programs and philosophies from their domestic markets are often not successful. Market research is essential for determining what you need to do to adapt to the new market.
The second step in the analysis is often having existing or new Board members or team members test your assumptions based on their own experiences. For private companies a special advisory board made up of with individuals with sector / geographic experience may be a helpful strategy. For public companies, directors with sector / geographic experience who understand the duty of care required in the public markets can bring invaluable expertise. Bringing the right people to the Board or advisory team when entering foreign markets should go hand in hand.