Bureaucracy and Corruption Rated Top Threats to Foreign Companies' Success in Emerging Markets
Corruption and red tape are the biggest threats to success in emerging markets, according to the Business Perspectives on Emerging Markets 2012-2017 Report by Global Intelligence Alliance (GIA).
- (1888PressRelease) August 01, 2012 - Corruption is almost as big a threat to success in emerging markets as red tape say international companies, according to the Business Perspectives on Emerging Markets 2012-2017 Report by Global Intelligence Alliance (GIA).
The market intelligence advisors says that over one third of the companies in its latest survey named bureaucracy as their biggest threat, and a third also said corruption and weak rule of law are the top threat. Economic volatility in emerging markets is less on companies' minds now than it was 10 or 15 years ago, while competition from both local and other foreign players is more of a worry for many.
The survey respondents also said that the top success factors are access to customers, adapting to local culture, building a strong brand and teaming up with the right local partner.
There is some variation across industry sectors. The automotive and logistics sectors say that localizing their competitive positioning is key, and pricing is also very important for car-makers. Energy companies say they have to get their government relations right if they want to succeed in emerging markets.
Seen as the least important success factors were access to local sources of financing, IP protection and reliable access to energy sources.
One threat created internally by the companies themselves is a lack of emerging markets understanding at headquarters.
The top threat for industrial manufacturing companies and pharmaceutical companies is competition from local players. International automotive companies, many of which have been established in some emerging markets such as China for decades, say competition from other foreign entrants is the biggest threat for them. Chemical companies cite political risk as the top threat, while, perhaps not surprisingly, poor infrastructure is the main concern for logistics companies.
The following were viewed as less threatening factors; foreign exchange rate changes; lack of demand; international supply chain cost; grey markets / parallel imports and repeated losses.
"As more and more companies shift their locus of growth towards emerging markets, they need to be prepared to encounter and overcome a range of red tape hurdles, from confusing and contradictory taxes in Brazil to tea money [backhanders] in Thailand. Those who persist and succeed in doing this will then need to ensure that they prioritize and focus on the market entry must-haves relevant to the specific market they are going into, such as securing sufficient distribution - often necessarily via a shaky distribution system - localization of the brand and the product, and of course hitting the right price point. That's the only way they will tap into the much-vaunted growth opportunities in emerging markets, and this is where market intelligence becomes invaluable," said Pete Read, head of Strategic Analysis & Advisory at Global Intelligence Alliance.
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Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
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About the Business Perspectives for Emerging Markets 2012-2017 Report
www.globalintelligence.com/insights-analysis/emerging-markets
In April-May 2012, Global Intelligence Alliance (GIA) conducted an online survey amongst business managers at 431 large and mid-sized companies and organizations worldwide, with questions such as:
-How do you define Emerging Markets in your company?
-Which are the top Emerging Markets for your industry over the next five years?
-What key factors will determine whether foreign companies succeed in Emerging Markets?
-What are the biggest threats to succeeding in Emerging Markets?
-What are your company's main reasons for investing in Emerging Markets?
-What share of your company's global revenue do you expect to come from Emerging Markets?
-Which one aspect of your Emerging Markets strategy would you go back and change if you could?
Industries covered include: Manufacturing & Industrial; Telecommunication, Technology & Media; Professional & Business Services; Financial Services; Consumer & Retail; Pharmaceuticals & Healthcare; Energy, Resources & Environment; Automotive; Chemicals; Logistics & Transportation.
Respondents: Nearly half (42%) of the companies in the survey earned more than $1.3 billion (1 billion Euro) in annual revenue and more than 50% (58%) have more than 1,000 employees. The respondents' job functions included strategic planning/business development (26%), market/competitive intelligence (23%), senior management (19%), sales and marketing (13%), research and development/product management (9%), among others.
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