Think Local. The Final New Rule For Success In Emerging Markets (Part 3 Of 3) 

I've talked about some of the new rules for success in new markets- the need to plan BIG for your emerging market strategy and the importance of rethinking your business model for the new market rather than just tweaking a successful domestic model. Both of those rules set the stage for the critical final rule...

Rule #3: Build a truly local business

Companies need to adapt their domestic model for success, conduct a full-scale market assessment and build a truly local business within the market. They need to rethink everything at a local level if they want to create something that is applicable and sustainable.

I've seen a great example of a company that got this right. The manufacturer wanted to build 15 plants across China. They began with an analysis of demand patterns for the product, both today and in the future in an effort to understand how demand would shift over time. Since the company made components for high-growth OEM products, they knew demand would initially concentrate on the coast of China, with some in Beijing, Shanghai and Shenzhen. Over time, however, this would spread into tier 2 and 3 cities, especially in the west.

They wanted to know where and when to deploy factories, so the company evaluated 12 dynamic factors, including labor rates, government incentives, logistics and proximity to customers, suppliers and competitors. They then examined regional and site determinants and how they would impact talent recruiting, development and quality of life. These included availability of workforce, transportation access, utility access, metropolitan area and zone administrations, environmental impact issues, land cost and taxes.

They ran several scenarios, all of which forced them to rethink their distribution channel strategy, price points, service, support and other key aspects of their plan. Only then were they able to truly understand their competition and get creative about how they could leverage local conditions. This lead to a sound business strategy.

While emerging markets do hold great promise, there is still a large graveyard full of companies that fell to common misconceptions... assuming a successful domestic model will work anywhere or that a billion customers and workers are within easy reach. Bringing your business into an emerging market is exciting, complex and challenging. Great success can be found by pairing local knowledge and talent with the courage to rethinking preconceived notions. Not to mention, significant patience, knowledge and genuine innovation.

Visit our site for more information on how to grow your business in emerging markets.

-Harsh Koppula, Managing Partner