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Emerging markets attract and intimidate. In today’s business landscape, these markets are an attractive vehicle of growth for various types of entrepreneurs. They also offer those who enter an opportunity to make a significant impact on the economy of the countries involved.
But entrepreneurs and businessmen alike are cautioned to tread lightly: there are a number of factors that need to be considered in order to find solutions to systematic social challenges in this market space, and have maximum impact upon entry. In Africa and South Africa specifically, these social challenges are exceedingly prominent and there is a huge need for entrepreneurs — at a startup or CEO level — to understand the emerging market space and make appropriate decisions within it.
Recognise institutional voids
A phrase thought up by Khanna in his book, Winning in Emerging Markets, an “institutional void” is a situation in emerging markets where there is an absence of intermediaries and specialist institutions used to connect buyers and sellers. These could include credit card systems or executive search firms.
By recognising an institutional void, an entrepreneur will also recognise an opportunity to fill a niche. Within the emerging market, institutional voids are constantly occurring, making it easy for entrepreneurs to develop business in these spaces.
Cater to the emerging middle class
If entrepreneurs are aiming at people in emerging markets who can afford global quality at global price points, they are going to find themselves having a difficult time. This group of people is in the minority, making the emerging middle-class the target market of choice.
The emerging middle-class wants goods and services to be world-class but at prices they can afford — which would typically be lower than the global price points.
It’s a challenging aspiration to fulfill, but not impossible. It requires entrepreneurs to be intentional with understanding local customers and ruthless in cutting out unnecessary product features that may be pushing up the price. Innovation at its peak. By doing this, entrepreneurs will maintain the quality of the product but reduce the price – appealing to the most important sector of the emerging market.
Focus on sustainability
Joergen Oerstroem Moeller, Adjunct Professor at Copenhagen Business School and Singapore Management University, believes that the impact of debt and scarcity of resources will shift the global economy to have a greater focus on sustainability and under-consumption.
Consumption patterns are therefore now focused on emerging markets – inhabited by those who are used to surviving on less than the developed world and are less demanding as consumers. This shift is a huge opportunity for entrepreneurs who want to develop more sustainable products and services, effectively creating “more from less”.
Upgrade leadership abilities
Entrepreneurs approaching emerging markets will need to become more competent in their ability to manage transformation and risk within their teams. This will require them to advance their communication skills, to become more empathetic and to increase their networking capacity to effectively manage and lead diverse teams. In essence, this means they’ll need to upgrade their leadership abilities.
Draw upon the expertise of NGOs and the public sector
In the past, entrepreneurs and multinationals may have seen NGO’s and the public sector as opponents, but when it comes to finding opportunities within emerging markets, they may need to learn from these organisations. With experience and credibility in dealing with the underprivileged and poorer parts of the populations, these organisations will be able to better inform multinational companies of the goods and services that are relevant to the unfamiliar territory of emerging markets.
Prepare to be flexible and endure
Success in emerging markets will belong to those who are ready to take on the changes, uncertainties and possible tensions that are bound to exist in a new market space. They will need to understand that endurance and flexibility is the way forward in approaching the the constantly changing developing world.