I recently contributed with an article for ArtRebels magazine on doing business in emerging markets. ArtRebels is a global platform for creative entrepreneurs. Anyway, here’s the article:
Make Emerging Markets Your Primary Market
Entrepreneurs, get out of your comfort zone. Forget about your home market and move to an emerging market to make it yours.
By Jacob Langvad Nilsson
With the economic shift from the developed world to the developing world, you’ve with certainty already heard about the promising opportunities in emerging markets. Whether you’re a multinational corporation (MNC) with consumer products, or a sole entrepreneur with a startup idea (or something in between the two), emerging markets is where you will find future growth opportunities.
Now there has been a lot of talk about the BRIC economies. BRIC is an acronym of Brazil, Russia, India, and China, coined by then Goldman Sachs economist Jim O’Neill in a 2001 paper titled “Building Better Global Economic BRICs”. The term has since become a symbol of the shift in global economic power from the developed economies towards the developing world.
The BRIC economies became mainstream terminology and was a huge success for Goldman Sachs (Mr. O’Neill has since been promoted to chairman of Goldman Sachs Asset Management and is now retiring comfortably at 56).
Since then, a multitude of other acronyms have surfaced. BRICS, when South Africa joined as an entrypoint for the contingent. Next 11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam) was supposedly the successors to BRIC. Another fancy acronym, CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) was another economist’s branding of a handful of favored emerging markets.
The BRICs are dead, long live emerging markets
If you are an entrepreneur or small business-owner with emerging market aspirations,you should forget about the BRIC terminology and all its variations. BRIC is for investors, not entrepreneurs. As an investor it makes sense to look at emerging markets from a broader perspective. For investors, there are several exchange-traded funds (ETFs) tailored for emerging markets, including BRICs. Just like an investor can choose to invest in ETFs such as Euro Government 3-5 year, Euro Inflation Linked, or MSCI World.
In my experience neither MNC or small entrepreneurs are looking at BRIC economies as a collective target for their business. They look at continents at best, but increasingly at markets within markets. States, regions, cities. Nieces.
To succeed in an emerging market, an entrepreneur needs to build products that are relevant to the consumer. To do so, the approach needs to be at a ground level to understand the opportunities and potential in a niche market.
The leading practice in building market intelligence is through qualitative research. I’ve been doing business ethnography in emerging markets on behalf of multinational brands for almost a decade. This has proven to be a market differentiator for corporations who want to target the specific needs of various segments of their customer-base but more importantly, help the companies tap into potential new markets by understanding the underlying motivations of their customers.
Whether your company is looking to expand into emerging markets or find a niche in a crowded one, ground-level field research helps your designers, engineers and R&D team connect to real consumers. This makes the difference between designing a good product and a great one.
How to pick a target market
China is a huge country with diversity and sub-markets. As a consequence, refrain from holding up unrealistic objectives, for example, that your 5-year plan is to become the market leader in China within your niche. You need to be more targeted in your approach to market penetration and align your objectives with the realities on the ground. In doing so, even if you narrowly dominant a specific market in a specific province in China, that’s already a big accomplishment and make it more likely for you to tap into other market opportunities.
Traditionally, a western firm’s China-strategy would be to establish an office in the capital city and spread out from there with one size-fits-all approach to the entire country. Increasingly today, you need to target individual provinces or regions with a custom strategy for each place. For instance, you may need to change communication slightly for each province or make changes in a pattern, stitch, colour, or flavor. Similarly, you can no longer take an existing product designed for a Western market and produce a scaled down version of this for an emerging market. Instead, you want to design a completely new product from the ground up for your emerging market consumer. If your product is good enough, it may subsequently spread to the rest of the world but knowing your targeted consumer is critical.
While mainstream investors continue to talk about the opportunities in Brazil, India, China, there’s a whole range of other emerging markets ripe with growth opportunities. Each market has its share of obstacles and challenges. Africa for example has been noted as the last untapped market for consumer growth. The Africa middle-class is booming and ready to spend their discretionary income on quality products. However, because many small and mid-sized Western companies today still employ the traditional approaches to market entry (and from the comfort of their home market), building a successful strategy for an African market remains a great challenge. As an entrepreneur, the grass-root approach of qualitative research to create a product market is an opportunity to win big and a custom recipe for success.
Use business ethnography to understand your consumer
Business ethnography can be used as a key strategy when an international brand expands into a new market. Ethnography is a social science discipline with roots in anthropology. Literally, ethnography is the study of mankind. Also known as participant-observation, ethnographic methods include entering a subject’s own environment: in the modern world, this includes their living room, school, the supermarket, the beauty parlor, or the streets – settings of their daily existence.
Ethnographers observe what people actually do and how they explain their actions. By documenting actual behavior, this research approach offers valuable insight into the meaning people attach to each action and activity. After a period of fieldwork and data-collection, findings are interpreted and analyzed in the context of people’s actual lives – including relations to family, community, local subculture, and the larger society.
When ethnographic research is taken into a business context, it can be used to gain insights into patterns of behavior that help businesses thrive. Unlike a traditional market researcher, who asks specific, highly practical questions, anthropological researchers visit consumers in their own environments to observe and listen, and interview in a non-directed way.
Qualitative methods, including focus groups and open-ended survey questionnaires, have proven to be valuable strategies to delve deeper into the relationship between the brand and those who buy or use their products. By listening, observing, and interpreting, we can access many meaningful layers that help clients better understand the true aspirations of their customers.
In the end, the goal of getting closer to the consumers is to better understand their cultures and behaviors, and in the process develop aspiring and meaningful products and services relevant to their lives. Business ethnography can help business do just that.
Try harder, get out of your comfort zone
To successfully take advantage of market opportunities, you need management-level officers to have boots on the ground. In a recent report, “Playing to Win in Emerging Markets”, the Boston Consulting Group (BCG) polled over 150 executives from the world’s biggest multinational companies. The report found that on average, these companies were earning 28% of their revenues in emerging markets.
Surprisingly though, most multinationals tend to keep their entire senior management team in their home office, which is largely in the developed countries. The unfortunate consequence is that management is too far removed to tackle the challenges involved in ensuring a competitive market presence and in adapting to the rapidly changing needs of its consumers. But for those firms that have moved at least a couple of their top executives to the new front line, the report highlights that the firms outperformed their rivals.
You don’t have to be a Forbes 500 company to win big in an emerging market. Obviously, capital and a strong idea are necessary ingredients for success. But if you are ready to immerse yourself into an emerging market, meaning literally moving there, you’ll be better positioned to understand the aspirations and culture of your consumer. Thus you’ll have a huge advantage to your average, Western competitor who won’t have the same access to first-hand knowledge on the ground.
Jacob Langvad Nilsson is an emerging market consumer consultant, visual ethnographer, and serial entrepreneur. With base is New York City, he travels extensively to emerging markets to push the boundaries of human-centered design research and tell stories about globalization, cultural shift, and the aspirations and desires of people living in a changing world.