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Strategies for success in emerging markets - New markets new competitors - EY - Global

Strategies for success in emerging markets

New markets, new competitors

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"The new generation of fast-growth market entrepreneurs is global at the outset." Bing Xiang

Companies in fast-growth countries have grown in confidence and are moving up the value chain.

They are investing in innovation, consolidating market share in their domestic markets and, increasingly, expanding overseas — to both other fast-growth and developed markets.

Implications for business

How can your company prepare for new competition from fast-growth countries?

  • Learn from new fast-growth-market competitors and apply the lessons to traditional companies.
  • Anticipate the possibility of becoming an acquisition target for fast-growth-market companies.
  • Expect to see fast-growth-market companies taking minority stakes in developed-world multinationals.
  • Look for deal synergies that might result from different demographic profiles and cultures.
  • Shed the "old" way of doing things and increase flexibility and speed of response to opportunities in global markets.

Fast-growth market companies are:

Using their huge domestic markets as a springboard for global expansion. The major fast-growth economies are becoming the engines of global consumption. For example, China is already the world's largest market for cars, mobile phones, luxury goods and televisions.

As more people enter the middle class in the fast-growth economies and feel comfortable about spending, these markets will continue to expand. It is possible for domestic companies in those areas to become global giants without venturing overseas.

Born global. Not all fast-growth market companies see the need to consolidate their domestic position before heading overseas. A new breed of younger entrepreneurs is moving beyond the traditional business models of low cost and economies of scale to build competitive advantage around innovation, technology and the leveraging of global resources.

Likely to make cross-border acquisitions. The desire to build an innovation-based society will encourage a growing number of companies from fast-growth markets to acquire assets in developed markets.

Set to benefit from equity participation. Regardless of whether they are global or domestic, fast-growth-market companies will need to leverage global resources in order to succeed. A company that derives most of its revenues from China still needs to scour the world for the best materials, talent and technologies.

If it doesn't, it will lose out to competitors that are better able to integrate resources from other markets.

Able to adapt and respond quickly to external changes. Western companies were built on the assumption that the western market would always be the dominate one. Their teams are filled with people who have experience limited to these core markets. The challenge for Western companies when they enter these fast-growth markets will be to unlearn the old business models.

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