Looking beyond the obvious
Companies must enter markets they may not have considered
While the BRICs remain critical to their strategy, leading companies are also looking closely at opportunities in non-BRIC emerging markets and developed markets.
“Organizations need to be rigorous, disciplined and highly focused in their choice of markets and investments.”
- John Ferraro, Chief Operating Officer, EY
They’re discovering that a standard strategy for a group of markets no longer works. Instead, what they will need are nuanced and customized strategies for different markets, areas, regions, sectors and countries.
“We do not align ourselves with markets in the traditional way of thinking about emerging versus developed,” says Maher Al-Haffar, Senior Vice President of Communications, Investor Relations and Public Affairs at Mexico-based CEMEX, one of the world’s leading manufacturers of cement, concrete and related building materials.
“What we try to look at is the structure of the market. Sometimes you have emerging markets that do not have a high-growth trajectory, and you have high-growth markets that are not particularly profitable. China, for example, has high growth but is much lower on the priority list than somewhere like Mexico or India because the structure of the market is different.”
Securing a sustainable competitive advantage
With many investment possibilities available worldwide, companies will need to consider where they allocate their scarce resources. They do not need to seize every opportunity. Taking “big bets” on carefully chosen markets, categories or technologies offers the best chance of securing a sustainable competitive advantage.
“You can’t play in every market,” cautions Ian Hudson, President for Europe, Middle East and Africa at DuPont. “You look at GDP growth, population and the types of industries that these markets have and how that fits with your own competitive advantages.
"If you look at Nigeria with 180 million people and Indonesia with 180 million people, Indonesia is probably an easier choice than Nigeria, although maybe in the longer term Nigeria may have bigger potential. It’s those sorts of calls that we have to make – although in this case we have to be in both."
Hudson adds that companies need to be meticulous about where they place their resources. "You have got to have a laser-like focus on pinpointing pockets of growth, but it’s become much more difficult to define growth and ensure that it is profitable.”
Companies must make their bets now
What makes selecting the next growth opportunities even more difficult is that companies must make those bets now. They cannot wait for uncertainty to go away – the problems in the Eurozone, and possible fallout of the fiscal uncertainty in the US, for example, are likely to persist for several years.
By waiting too long to invest, businesses will allow competitors to build a presence and market share in those areas, making it more expensive to commit resources and more difficult to compete effectively when they finally decide to take the plunge.
“If you are a technology company, you want to establish a leadership position in a market which is in an adoption phase,” says Alfonso di Ianni, Senior Vice President for the Eastern Central Europe, Middle East and Africa regions at Oracle. “We need to make sure that our technologies are taken first before the others.”