Emerging Markets - UNC Kenan-Flagler Business School

5 things brands should know about doing business in emerging markets

J.B. Steenkamp presents at the 2016 UNC Kenan-Flagler Business School Emerging Markets Conference

J.B. Steenkamp presents at the 2016 UNC Kenan-Flagler Emerging Markets Conference.

Innovation and globalization are reshaping the business world as we know it. In today’s hyper-connected economy, companies must actively seek new opportunities for growth to bolster business, win and maintain market share.

Many of those opportunities lie in emerging markets. As success stories emerge from power brands like Apple, companies are increasingly eyeing opportunities for expansion and profitable growth in countries with developing economies – and creating a lot of competition for established multinational corporations.

The influence of global brands in emerging markets depends on how well corporations can adapt. To succeed, brands must enter emerging markets early. This requires companies to have a clear understanding of how the competitive landscape and how their brand fits into the market, and to work quickly to connect with their new customer base.

Conversely, brands native to emerging markets may need government facilitation to extend into other countries and become globally competitive. As Western brands have moved into emerging markets, local companies face stiff competition and must find innovative ways to earn market share. The strong presence of multinational car manufacturers like GM and Volkswagen has weakened Chinese car companies. China hopes to gain control of an untapped industry segment – electric cars – via government incentives and programs available exclusively to local brands.

At the same time, Western companies experience stiffer competition from emerging markets firms that realize the need to move from acting as suppliers only into R&D, promotion and branding.

Nate Wong, manager of social impact strategy at Monitor Deloitte, and Jan-Benedict Steenkamp, Knox Massey Distinguished Professor and Chair of Marketing, shared their insights and expertise on these trends at the 2016 UNC Kenan-Flagler Emerging Markets Conference hosted by the Global Business Center.

These are the five things they say companies should know about doing business in emerging markets.

The growth of the middle class and increases in discretionary spending are happening worldwide.
These increases have not only been seen in the Western world, but also in developing economies. The emergence of mega-cities in countries like India and South Africa has opened the door for companies to connect with new, untapped consumer bases – and those opportunities have prompted some multinational corporations to move into emerging markets.

Emerging markets don’t come without risk.
Multinational brands often view the availability of cheaper labor and lower raw material costs in emerging markets as an opportunity to create greater revenues – but it should be noted that these markets also come with many uncertainties. Issues like political and social instability, as well as different regulations, can hurt a corporation’s profitability and deter multinational corporations from establishing a presence in the market.

Multinational companies must tailor their business model.
Different countries and regions require separate planning and execution in a multinational corporation.  Differences in consumer preferences, behaviors and local policies must be considered before entering any market.  It is important for corporations to morph their brand in congruence to the market’s norm. Corporations may change the distribution channel, like food delivery on bikes rather than cars, or the actual product, as flavors and menus differ by country to appeal more to local taste buds.

Don’t forget the raw materials.
Multinational companies don’t just need to think about marketing to emerging markets – they also need to consider sourcing and production. To operate in a new market, companies must train local farmers, factory workers and employees on exactly how they want their raw materials produced, harvested or constructed and monitor these processes to ensure their needs and quality standards are met.

Building brand awareness and value are essential.
Most companies based in emerging markets have been acting as suppliers for larger Western brands. With the global success of Apple and other major U.S. brands, companies in countries like China and India are beginning to recognize the impact that branding can have on a multinational business plan. In order to create their own multinational identity, these companies must update their business models to include R&D, promotion, STP marketing and branding efforts.

By Emily Brice (BA ’18)